THE  LIBRARY 

OF 

THE  UNIVERSITY 
OF  CALIFORNIA 

LOS  ANGELES 


HISTORY  OF 
POLITICAL   ECONOMY 


AU  right*  rtitrvt* 


A   HISTORY 


OF 


POLITICAL    ECONOMY 


if 

JOHN  KELLS  INGRAM,  LL.D. 

FELLOW  OF  TRINITY  COLLEGE,    DUBLIN 


itJ)  preface 


PKOF.  E.  J.  JAMES,  PH.D. 

UNIVEBSITY  OF  PENNSYLVANIA 


•Neto  fJork: 

THE    MACMILLAN    COMPANY. 
1902. 


COPYRIGHT,  1887, 

BY 
GEORGE  W.  DILLAWAY. 


Press  of  J.  J.  Little  &  Co. 
Astor  Place,  New  York. 


PBEFACE. 


IT  is  with  great  pleasure  that  I  embrace  the  opportunity 
afforded  me  by  the  publishers  of  Dr.  Ingram's  "History  of 
Political  Economy  "  to  commend  the  book  to  the  attention  of 
the  American  public.  Dr.  Ingram  needs  no  introduction  to 
our  students  of  economics.  His  work  in  the  Encyclopaedia 
Britannica  has  attracted  marked  attention  wherever  earnest 
thinkers  are  studying  the  social  and  economic  problems  of  our 
time,  whether  in  Europe  or  America.  The  present  treatise 
deserves  especial  notice,  as  the  first  serious  attempt  by  a  pro- 
perly qualified  English  writer  to  present  a  view  of  the  progress 
of  economic  thought.  The  works  of  M'Culloch  and  Twiss 
on  the  same  subject  were  of  value  only  because  there  was 
nothing  else  on  the  same  topic.  They  testify  eloquently  to 
the  exceedingly  primitive  state  of  the  history  of  economic 
thought  and  policy  which  existed  in  their  day.  The  work 
of  Blanqui,  recently  translated  into  English,  is  rather  a 
history  of  economic  systems  (and  a  poor  one  even  as  such) 
than  of  economic  theories  and  doctrines.  Up  to  the  time  of 
the  appearance  of  the  nineteenth  volume  of  the  Encyclopaedia 
Britannica  there  was  no  essay  on  the  subject  in  English 
which  could  be  considered  a  very  valuable  one.  We  now 
Vave  a  treatise  which  will  compare  favourably  with  any  work 
of  similar  compass  in  any  other  language. 

1381036 


vi  PREFACE. 

It  seems  appropriate  in  this  connection  to  emphasise  briefly 
the  importance  of  this  service  to  our  American  schools  and 
colleges.  In  no  country,  except  possibly  France,  has  there 
been  such  pure  and  unadulterated  teaching  of  dogma  in  the 
realm  of  economics  as  in  America.  The  teaching  of  thi? 
subject  has  been  largely  in  the  hands  of  clergymen  or  other 
people  whose  specialties,  so  far  as  they  have  had  any,  have 
lain  in  other  directions.  "When  called  upon  to  teach  the 
subject  they  have  ordinarily  taken  some  standard  text-book 
and  taught  it  verbatim  et  literatim,  adhering  to  the  letter  in 
a  manner  which  would  have  seemed  ridiculous  even  to  the 
authors  of  the  books,  though  they  were  oftentimes  dogmatic 
enough  themselves. 

The  result  was,  of  course,  not  merely  superficiality,  but  an 
extreme  form  of  doctrinaireism  and  a  priori-ism,  which  even 
yet  dominates  to  a  large  extent  the  public  mind  so  far  as  this 
troubles  itself  with  economic  principles  at  all.  The  great  phe- 
nomena of  our  modern  industrial  life  do  not  allow  themselves 
to  be  subsumed  under  any  such  simple  economic  forms.  The 
result  has  been  that  in  the  case  of  those  who  really  thought 
about  the  subject  at  all,  and  who  tried  to  bring  their  practical 
ideas  into  harmony  with  the  economic  teaching  which  they 
had  received,  the  sentiment  took  strong  hold  and  found 
frequent  expression  that  it  is  all  very  well  to  propound  econo- 
mic doctrines,  and  they  may  be  true  in  theory,  but  they  will 
not  work  in  practice.  In  the  case  of  those  who  did  not  think 
of  the  matter  at  all  there  would  be  found  the  grossest  incon- 
sistency between  their  professed  economic  doctrines  and  their 
actual  views  of  public  policy  and  economic  phenomena. 

A  change  has  recently  taken  place  in  the  spirit  and  methods 
of  teaching  the  subject,  so  that  now  there  is  scarcely  a  leading 
centre  of  college  or  university  instruction  in  which  the  old 


PREFACE.  vh 

plan  has  not  been  considerably  modified.  This  is  a  change 
in  the  right  direction,  I  believe,  and  whatever  will  hasten  its 
progress  deserves  serious  attention.  To  this  end  nothing  will 
contribute  more  than  a  study  of  the  history  of  the  rise  and 
development  of  economic  systems  and  economic  thought.  A 
thoughtful  study  of  the  history  of  investigation  and  theories 
has  valuable  results  in  any  branch  of  human  learning,  but  above 
all  in  the  field  of  moral,  philosophical,  and  social  science. 

The  first  lesson  borne  in  upon  the  serious  student  of  eco- 
nomic systems  and  economic  thought  is  the  essential  relativity 
of  economic  theories,  at  least  of  all  such  as  have  been  hitherto 
propounded.  The  dogmatist  in  the  field  of  economics,  the  man 
who  never  learned  anything  from  history,  regards  the  whole 
past  development  of  politics  and  theories  as  did  Say,  who 
looked  upon  the  history  of  the  science  as  a  record  of  absurd 
and  justly  exploded  opinions.  But  the  man  who  studies  them 
carefully  in  order  to  find  out  what  measure  of  truth  was  in 
each  form  which  prevailed  and  exercised  a  wide  influence 
finds  the  conviction  gradually  borne  in  upon  him  that  econo- 
mic systems  and  theories  change  with  every  great  change  in 
industry  and  in  man.  The  axioms  and  theorems  which  apply 
to  one  form  of  society  may  have  little  or  no  application  in 
another  form,  and  any  attempt  to  make  such  application  may 
result  in  the  most  absurd  conclusions.  An  explanation  of  the 
phenomena  of  industrial  life  in  such  a  community  as  ancient 
Eome  or  mediaeval  Europe  will  not  serve  as  an  explanation  of 
the  life  of  to-day.  Nor  will  a  theory  which  is  adequate  to  the 
demands  of  an  industrial  state  like  England  or  America  suit 
such  a  country  as  India  or  Africa.  It  is  not,  therefore,  a 
science  in  which  the  laws  and  principles  may  be  safely  compared 
with  the  laws  and  principles  of  physics  and  chemistry,  which, 
BO  far  as  we  know,  are  true  in  all  times  and  placea  In  other 


tlii  PREFACE. 

words,  the  science  of  economics  must  be  relative  and  progres- 
sive, because  the  phenomena  which  form  its  subject-matter  are 
changing  all  the  time,  not  merely  from  age  to  age,  but  from 
country  to  country.1 

The  view,  therefore,  expressed  by  Colonel  Torrens  over  sixty 
years  ago  is,  at  least  in  the  sense  in  which  he  was  think- 
ing of  it,  an  erroneous  one.  He  wrote  as  follows  : — "  In  the 
progress  of  the  human  mind  a  period  of  controversy  amongst 
the  cultivators  of  any  branch  of  science  must  necessarily 
precede  the  period  of  unanimity.  With  respect  to  Political 
Economy,  the  period  of  controversy  is  passing  away,  and  that 
of  unanimity  is  rapidly  approaching.  Twenty  years  hence 
there  will  scarcely  be  a  doubt  respecting  any  of  its  funda- 
mental principles."  Mill,  writing  twenty  years  later,  thought 
to  formulate  those  principles  on  which  everybody  agreed,  and 
believed  confidently  that  on  several  topics,  like  that  of  value, 
for  example,  the  last  word  had  been  spoken.  Travers  Twiss, 
in  his  lectures  at  Oxford  in  1846,  said  that,  while  it  was  true 
that  the  simplest  doctrines  of  the  science  were  vigorously  con- 
troverted during  the  earlier  part  of  the  century,  yet  all  the 
great  principles  are  now  readily  acquiesced  in  ;  and  he  proposed 
to  show  how  this  had  been  accomplished.  His  attitude  was 
significant.  He  proposed  not  to  show  the  modicum  of  truth 
which  lay  in  each  of  the  great  systems  of  economic  policy  and 
theory,  but  how  they  were  all  false,  and  how  they  had  been 
gradually  superseded  by  the  pure  and  unadulterated  system  of 
truth  as  it  existed  in  his  day. 

Less  than  fifteen  years  after  Twiss  had  written  these  words 
we  find  Professor  Cairnes  almost  in  despair  over  the  prospects 

1  The  economic  laws  which  may  be  discovered  as  the  result  ef  a  com- 
plete comparative  view  of  human  history  and  development  belong,  of  course 

In  A  (\\fffrp.nt.  rat.p.tmrv    anil  are  ftasfrihfiri  hv  Dr.  Inoram  on  D.  2Os. 


iaa 


different  category,  and  are  described  by  Dr.  Ingram  on  p. 


PREFACE.  it 

of  the  science  on  account  of  the  continued  agitation  against 
what  he  is  pleased  to  call  its  fundamental  principles.  He 
says  in  his  first  lecture  delivered  before  the  University  of 
Dublin,  in  commenting  upon  Torrens'  prophecy  above  quoted  : 
— "  Five-and-thirty  years  have  passed  since  that  unlucky  pro- 
phecy was  uttered,  and  yet  sudh  questions  as  those  respecting 
the  laws  of  population,  of  rent,  of  foreign  trade,  the  effects  of 
different  kinds  of  expenditure  on  distribution,  the  theory  of 
prices — all  fundamental  in  the  science — are  still  unsettled,  and 
must  still  be  considered  as  '  open  questions,'  if  that  expression 
may  be  applied  to  propositions  which  are  still  vehemently 
debated,  not  merely  by  sciolists  and  smatterers  who  may 
always  be  expected  to  wrangle,  but  by  the  professed  cultivators 
and  recognised  expounders  of  the  science.  So  far  from  the 
period  of  controversy  having  passed,  it  seems  hardly  yet  to 
have  begun — controversy,  I  mean,  not  merely  respecting  pro- 
positions of  secondary  importance  or  the  practical  application 
of  scientific  doctrines  (for  such  controversy  is  only  an  evi- 
dence of  the  vitality  of  the  science,  and  is  a  necessary  con- 
dition of  its  progress),  but  controversy  respecting  fundamental 
principles  which  lie  at  the  root  of  its  reasonings,  and  which 
were  regarded  as  settled  when  Colonel  Torrens  wrote." 

In  the  preface  to  the  published  lectures  Professor  Cairnes 
states  it  to  be  his  purpose  "  to  bring  back  the  discussions  of 
Political  Economy  to  those  tests  and  standards  which  were 
formerly  considered  the  ultimate  criteria  of  economic  doctrine, 
but  which  have  been  completely  lost  sight  of  in  many  modern 
publications."  Although  he  thus  admits  the  existence  of  great 
difference  of  opinion,  yet  he  also  shows  that  he  is  a  stead- 
fast believer  in  the  ultimate  truth  of  the  old  formulations, 
and  an  apologetic  tone  runs  through  his  remarks,  as  if  he 
needed  to  justify,  to  himself  at  least,  his  willingness  to  take 


X  PREFACE. 

any  notice  of  a  set  of  men  who  were  so  blind  as  to  deny  the 
validity  of  the  old  system. 

Now,  as  we  have  noted  above,  a  study  of  the  history  of 
economic  systems  and  economic  theories  of  society  in  its 
various  industrial  stages,  and  of  the  explanations  offered  of 
its  industrial  phenomena  by  contemporaneous  writers,  com- 
pletely changes  such  a  mental  attitude.  The  student  becomes 
aware  that  every  one  of  the  great  systems  possessed  some 
truth,  and  no  one  has  been  elaborated  which  contains  the 
whole  truth.  He  becomes  aware  of  a  still  more  important 
fact,  and  that  is,  that  owing  to  the  continual  changes  in  the 
nature  of  the  elements  with  which  he  has  to  deal,  no  uni- 
versal system,  no  system  which  shall  be  valid  in  all  times 
and  places,  can  at  present,  if  indeed  it  ever  can,  be  formu- 
lated. We  can  formulate  for  our  time  and  country,  for  our 
type  of  society  and  industry,  for  our  race  and  nation ;  but 
such  a  formulation,  even  though  perfectly  correct,  would  pro- 
bably not  hold  for  any  other  time  or  country  or  type  at 
race,  though  it  would,  of  course,  hold  true  of  them  to  just  the 
extent  to  which  they  are  similar  to  us  and  ours.  As  a  result 
of  this  conviction,  when  a  problem  presents  itself,  the  eco- 
nomist does  not  set  out  with  a  firm  determination  to  force  it 
at  any  cost  into  the  old  moulds.  He  recognises  that  there 
are  probably  new  elements  in  the  case  which  cannot  be 
brought  within  the  old  formulas  without  changing  the  prob- 
lem to  such  an  extent  that  its  solution  would  be  of  no  value, 
since  it  would  no  longer  correspond  to  the  actual  problem  to 
be  solved.  On  the  contrary,  he  devotes  himself  to  a  careful 
study  of  all  the  elements  in  the  case,  and  while  seeking  help 
from  all  the  solutions  of  other  similar  and  dissimilar  problems 
of  other  times  and  countries,  recognises  that  after  all  the  exist- 
ing problem  is  a  new  one,  and  that  any  attempt  to  apply  the 


PREFACE.  xi 

cut  and  dried  recipes  of  an  a  priori  system  san  only  result 
in  failure. 

Now,  it  is  this  mental  attitude — a  recognition  of  the  value 
of  the  services  of  the  great  thinkers  of  the  past,  combined 
with  an  equally  full  recognition  that  they  were  but  creatures 
of  their  age,  writing  and  thinking  primarily  for  their  time 
and  society,  and  were  circumscribed  by  the  same  limitations 
as  hedged  in  their  contemporaries  in  similar  fields — that  every 
economic  thinker  should  strive  to  attain.  Only  in  this  way 
can  we  do  justice  to  the  contributions  of  former  thinkers,  and 
at  the  same  time  keep  our  minds  open  for  the  reception  of 
all  new  truth. 

Of  course,  there  is  more  or  less  of  this  spirit  in  all  the 
great  writings  on  the  subject  of  Political  Economy.  Mill,  in 
particular,  deserves  praise  for  admitting  to  a  certain  extent 
the  validity  of  the  above  view,  but  his  knowledge  of  economic 
history  was  not  sufficient  and  his  "  historical  sense  "  was  not 
sufficiently  developed  for  him  to  come  thoroughly  under  the 
influence  of  this  truth.  In  his  discussion  of  the  theory  of 
Distribution  he  acknowledged  the  justness  of  this  conception, 
but  failed  to  carry  it  into  the  domain  of  Production.  He  thus 
stamped  himself  as  a  believer  in  the  existence  of  "  natural 
laws  "  in  economics  in  the  Ricardian  sense  of  that  term. 

In  developing  this  spirit  a  good  text-book  written  from 
such  a  point  of  view  is  a  great  aid.  We  are  under  special 
obligations,  therefore,  to  Dr.  Ingram  for  the  preparation  of  this 
convenient  hand-book.  It  is  believed  that  its  general  intro- 
duction into  our  college  and  university  work  would  greatly 
stimulate  the  careful  study  of  economic  thought  and  policy. 

I  may  be  pardoned  one  word  in  regard  to  the  so-called 
"  New  Political  Economy."  It  is  perhaps  a  matter  of  indif- 
ference whether  the  change  which  has  recently  taken  place  in 


•M  PREFACE. 

the  tendencies  and  methods  of  economic  thought  be  dignified 
by  a  distinctive  name  or  not.  The  important  point  is  that 
there  has  been  a  great  change,  and  that  the  valuable  work 
in  economics  for  the  last  twenty  years  has  nearly  all  been 
done  by  men  who  are  distinctly  under  the  influence  of  thia 
new  spirit,  whether  they  profess  themselves  as  adherents 
of  the  new  school  or  not.  The  term  "Historical  School" 
has  been  employed  to  distinguish  one  set  of  writers  and 
thinkers  connected  with  the  movement.  There  is  much 
misunderstanding  as  to  what  these  men  have  accomplished 
in  economics,  and  as  to  what  they  are  trying  to  accomplish. 
Their  work  is  not  limited,  as  many  seem  to  think,  to  a  study 
of  former  writers  on  economics.  Their  object  is  the  same  as 
that  of  previous  investigators,  viz.,  to  find  as  far  as  possible 
the  laws  underlying  the  industrial  progress  of  human  society. 
They  believe,  however,  that  this  can  be  done  only  by  a  care- 
ful study  of  the  origin  and  development  of  human  society  on 
its  industrial  sides.  The  economic  systems  best  adapted  to 
further  the  industrial  interests  of  society  must  change  with 
every  great  change  in  social  organisation,  and  with  the  gradual 
change  in  the  character  of  man  himself  which  is  the  result 
of  advancing  civilisation.  It  is  believed  that  by  a  study  of  the 
economic  systems  of  successful  societies  a  clue  may  be  dis- 
covered to  a  general  law  of  industrial  progress.  By  discovering 
and  studying  the  essential  features  of  many  different  national 
economies  we  may  finally  by  comparison  deduce  (or,  if  you 
like  it  better,  induce)  a  general  rule  of  economic  development 
which  may  form  the  basis  of  a  general  political  economy. 

Whether  this  view  be  just  or  not — and  we  must  admit,  I 
think,  that  the  positive  results  in  this  particular  direction  are 
not  all  that  could  be  desired,  since  they  have  been  such  as 
to  lead  some  writers  to  give  up  any  hope  of  ascertaining 


PREFACE.  xiii 

any  general  laws  of  economics — yet  the  negative  results  have 
been  neither  few  nor  unimportant.  They  have  demonstrated 
•beyond  a  doubt  that  some  of  the  so-called  orthodox  views 
as  to  the  "  cosmopolitanism  and  perpetualism "  of  the  natu- 
ral laws  of  Political  Economy  were  erroneous.  What  were 
claimed  to  be  fundamental  principles  of  all  economic  theory 
have  been  proved  to  hold  good  only  in  a  certain  form  of 
society — which  is  to  be  found  only  on  a  very  small  portion  of 
the  earth's  surface,  and  not  even  there,  in  the  purity  pre- 
supposed by  the  premises  of  this  theory. 

This  is  a  real  service ;  since  next  to  offering  a  theory  which 
will  explain  additional  phenomena  is  the  service  which  proves 
beyond  a  doubt  that  the  generally  accepted  one  does  not  and 
cannot  explain  known  facts;  for  the  result  of  such  demon- 
stration must  be  a  quickened  zeal  in  discovering  the  true 
doctrine.  The  work  of  the  so  called  Historical  School  has 
thus  far,  then,  been  primarily  critical  and  destructive,  though 
it  has  resulted  in  bringing  to  light  an  enormous  amount  of 
material,  which  must  be  utilised  by  him  who  would  construct 
anew  those  places  which  have  been  torn  down.  To  under- 
stand their  work  fully — and  this  is  an  essential  thing  for  every 
one  who  would  comprehend  the  present  tendencies  in  econo- 
mics— a  study  of  the  history  of  economic  theory  is  necessary. 
In  this  work  no  better  guide  is  at  present  attainable  for  the 
English  student  than  this  book  of  Dr.  Ingrain's. 


E.  J.  JAMES. 


UVOTRSITY  or  PENNSYLVANIA, 
PHILADELPHIA, 


BIBLIOGRAPHICAL  NOTE. 

THE  reader  is  referred  for  fuller  information  to  the  following 
books  on  the  history  of  Political  Economy,  all  of  which  have 
been  more  or  less,  and  some  very  largely,  used  in  the  prepara- 
tion of  the  present  work  : — 

GENERAL  HISTORIES. — Sistoire  de  rficonomie  Politlque  en  Europe 
depuis  les  anciens  jusqu'  a  no*  jours,  by  Jerome  Adolphe  Blanqui  (1837- 
38) ;  of  which  there  is  an  English  translation  by  Emily  J.  Leonard 
(1880).  Histoire  de  V Economic  Politique,  by  Alban  de  Villeneuve- 
Bargemont  (Brussels,  1839;  Paris,  1841);  written  from  the  Catholic 
point  of  view.  View  of  the  Progress  of  Political  Economy  in  Europe  since 
the  Sixteenth  Utntury,  by  Travers  Twiss,  D.C.L.  (1847).  Die geschichtliche 
Entwickelung  der  National- Oekonomik  und  ihrer  Literatur,  by  Julius 
Kautz  (ad  ed.  1860) ;  a  valuable  work  marked  by  philosophical  breadth, 
and  exhibiting  the  results  of  extensive  research,  but  too  declamatory  in 
style  ;  the  book  sadly  wants  an  index.  Kritische  Geschichte  der  National- 
Ckonomie  und  der  Socialismus,  by  Emile  Diihring  (1871  ;  3d  ed.  1879) ; 
characterised  by  its  author's  usual  sagacity,  but  also  by  his  usual  per- 
verseness  and  depreciation  of  meritorious  writers  in  his  own  field.  Guida 
olio  studio  dell'  Economia  Politico,,  by  Luigi  Cossa  (1876  and  1878  ;  Eng. 
trans.  1880).  Geschichte  der  Nationalb'konomik,  by  H.  Eisenhart  (1881); 
a  vigorous  and  original  sketch.  And,  lastly,  a  brief  but  excellent  history 
by  H.  von  Scheel  in  the  Handbuch  der  politischen  Uekonomie  (a  great 
encyclopaedia  of  economic  knowledge  in  all  its  extent  and  applications) ; 
edited  by  Gustav  Schon  berg  (1882 ;  2d  ed.,  enlarged  and  improved,  1886). 
To  these  histories  proper  must  be  added  The  Literature  of  Political 
Economy,  by  J.  R.  M'Culloch  (1845),  a  book  which  might  with  advantage 
be  re-edited,  supplemented  where  imperfect,  and  continued  to  our  own 
time.  Some  of  the  biographical  and  critical  notices  by  Eugene  Daire 
and  others  in  the  Collection  det  principaux  ficonomistes  will  also  be  found 
useful,  as  well  as  the  articles  in  the  Dictionnaire  de  I' Economic  Politiqvt 
of  Coquelin  and  Guillaumin  (1852-53;  3d  ed.  1864),  which  is  justly 
described  by  Jevons  as  "  on  the  whole  the  best  work  of  reference  in  the 
literature  of  the  science." 

SPECIAL  HISTORIES. — Italy. — Storia  della  Economia  Pubblica  in  Italia, 
otsia  Epilogo  critico  degli  Economisti  Italiani,  by  Count  Giuseppe  Pecchifl 


BIBLIOGRAPHICAL  NOTE.  xv 

(1829),  intended  as  an  appendix  to  Baron  Custodi'g  collection  of  th» 
Scrittori  dassici  Italiani  di  Economic,  Politico,,  50  vols.,  comprising  the 
writings  of  Italian  economists  from  1582  to  1804.  There  is  a  French 
translation  of  Pecchio's  work  by  Leonard  Gallois  (1830).  The  book  i» 
not  without  value,  though  often  superficial  and  rhetorical. 

Spain. — Storia  detta  Economia  Politico,  in  Espana  (1863),  by  M. 
Colmeiro  ;  rather  a  history  of  economy  than  of  economics — of  policies 
and  institutions  rather  than  of  theories  and  literary  works. 

Germany. — Geschichte  der  Nationalokonomik  in  Deutschland  (1874)-  by 
Wilhelm  Roscher ;  a  vast  repertory  of  learning  on  its  subject,  with  occa- 
sional side-glances  at  other  economic  literatures.  Die  neuere  National- 
okonomie  in  ihren  Hauptrichtungen,  by  Moritz  Meyer  (3d  ed.  1882) :  a 
useful  handbook  dealing  almost  exclusively  with  recent  German  specula- 
tion and  policy. 

England. — Zur  Getchichte  der  Englischen  VoUatoirthschafttlehre,  by  W. 
Roscher  (185 1-52). 

The  reader  is  also  advised  to  consult  the  articles  of  the  Encyclopaedia 
Britannica,  ninth  edition,  which  relate  to  the  principal  writers  on 
political  economy,  especially  those  on  Petty,  Quesnay,  Turgot,  Smith, 
Say,  and  Ricardo.  The  present  work,  it  should  be  stated,  is  for  the  most 
part  a  reproduction  of  the  article  "  Political  Economy,"  which  appeared 
(1885)  in  yoL  xix.  of  the  Encyclopaedia  Britannica. 

J.K.I 


CONTENTS. 


PAGE 

PREFACE    . v 

BIBLIOGRAPHICAL  NOTE xiv 

CHAP.     I.     INTRODUCTORY 1 

"       II.     ANCIENT  TIMES 7 

"      III.     THE  MIDDLE  AGES 34 

'*      IV.     MODERN  TIMES  :  Two  FIRST  PHASES       .        ..         .32 

"       V.     THIRD    MODERN    PHASE  :    SYSTEM    OF    NATURAL 

LIBERTY 55 

"     VI.     THE  HISTORICAL  SCHOOL 196 

"    VII.     CONCLUSION     ........    240 

INDEX  247 


OUTLINES 


OF  THE 


HISTORY  OF  POLITICAL  ECONOMY. 


CHAPTER  L 
INTRODUCTORY. 

IN  the  present  condition  of  Political  Economy,  the  production 
of  new  dogmatic  treatises  on  the  subject  does  not  appear  to  be 
opportune.  There  are  many  works,  accessible  to  every  one, 
in  which,  with  more  or  less  of  variation  in  details,  what 
is  known  as  the  "orthodox"  or  "classical"  system  is  ex- 
pounded. But  there  exists  in  England  and  other  countries  wide- 
spread dissatisfaction  with  that  system,  and  much  difference 
of  opinion  with  respect  both  to  the  method  and  the  doctrines 
of  Economic  Science.  There  is,  in  fact,  good  reason  to 
believe  that  this  department  of  social  theory  has  entered  on 
a  transition  stage,  and  is  destined  ere  long  to  undergo  a  con- 
siderable transformation.  But  the  new  body  of  thought 
which  will  replace,  or  at  leas;  profoundly  modify,  the  old, 
has  not  yet  been  fully  elaborated.  The  attitude  of  mind 
which  these  circumstances  seem  to  prescribe  is  that  of  pause 
and  retrospection.  It  is  thought  that  our  position  will  be 
rendered  clearer  and  our  further  progress  facilitated  by 
tracing  historically,  and  from  a  general  point  of  view,  tb.e 


a  POLITICAL  ECONOMY. 

course  of  speculation  regarding  economic  phenomena,  and  con- 
templating the  successive  forms  of  opinion  concerning  them 
in  relation  to  the  periods  at  which  they  were  respectively 
evolved.  And  this  is  the  task  undertaken  in  the  following 
pages. 

Such  a  study  is  in  harmony  with  the  best  intellectual 
tendencies  of  our  age,  which  is,  more  than  anything  else, 
characterised  by  the  universal  supremacy  of  the  historical 
spirit.  To  such  a  degree  has  this  spirit  permeated  all  our 
modes  of  thinking,  that  with  respect  to  every  branch  of 
knowledge,  no  less  than  with  respect  to  every  institution  and 
every  form  of  human  activity,  we  almost  instinctively  ask, 
not  merely  what  is  its  existing  condition,  but  what  were  its 
earliest  discoverable  germs,  and  what  has  been  the  course  of 
its  development?  The  assertion  of  J.  B.  Say1  that  the 
history  of  Political  Economy  is  of  little  value,  being  for  the 
most  part  a  record  of  absurd  and  justly  exploded  opinions, 
belongs  to  a  system  of  ideas  already  obsolete,  and  requires  at 
the  present  time  no  formal  refutation.2  It  deserves  notice 
only  as  reminding  us  that  we  must  discriminate  between 
history  and  antiquarianism :  what  from  the  first  had  no 
•significance  it  is  mere  pedantry  to  study  now.  We  need 
concern  ourselves  only  with  those  modes  of  thinking  which 
have  prevailed  largely  and  seriously  influenced  practice  in 
the  past,  or  in  which  we  can  discover  the  roots  of  the  present 
and  the  future. 

When  we  thus  place  ourselves  at  the  point  of  view  of 
history,  it  becomes  unnecessary  to  discuss  the  definition  of 
Political  Economy,  or  to  enlarge  on  its  method,  at  the  outset. 
It  will  suffice  to  conceive  it  as  the  theory  of  social  wealth, 
or  to  accept  provisionally  Say's  definition,  which  makes  it 

1  "  Que  pourrions-nous  gagner  a  recueillir  des  opinions  absurdes,  dea 
doctrines  de'crie'es  et  qui  merilent  de  I'Stre  ?  II  serait  a  la  fois  inutile 
et  fastidieux."  tcvn.  Pd.  Pratique,  IXme  Partie.  The  "cependant" 
which  follows  doea  not  really  modify  this  judgment. 

8  See  Roscher's  (jetchichtt  dcr  National-cekonomik  in  Ueuttchland, 
Vorrede. 


INTRODUCTORY.  3 

the  science  of  the  production,  distribution,  and  consumption 
of  wealth.  Any  supplementary  ideas  which  require  to  be 
taken  into  account  will  be  suggested  in  the  progress  of  our 
survey,  and  the  determination  of  the  proper  method  of  economic 
research  will  be  treated  as  one  of  the  principal  results  of 
the  historical  evolution  of  the  science. 

The  history  of  Political  Economy  must  of  course  he  dis- 
tinguished from  the  economic  history  of  mankind,  or  of  any 
separate  portion  of  our  race.  The  study  of  the  succession  of 
economic  facts  themselves  is  one  thing;  the  study  of  the 
succession  of  theoretic  ideas  concerning  the  facts  is  another. 
And  it  is  with  the  latter  alone  that  we  are  here  directly 
concerned.  But  these  two  branches  of  research,  though  dis- 
tinct, yet  stand  in  the  closest  relation  to  each  other.  The 
rise  and  the  form  of  economic  doctrines  have  been  largely 
conditioned  by  the  practical  situation,  needs,  and  tendencies 
of  the  corresponding  epochs.  With  each  important  social 
change  new  economic  questions  have  presented  themselves; 
and  the  theories  prevailing  in  each  period  have  owed  much  of 
their  influence  to  the  fact  that  they  seemed  to  offer  solutions 
of  the  urgent  problems  of  the  age.  Again,  every  thinker, 
however  in  some  respects  he  may  stand  above  or  before  his 
contemporaries,  is  yet  a  child  of  his  time,  and  cannot  be 
isolated  from  the  social  medium  in  which  he  lives  and  moves. 
He  will  necessarily  be  affected  by  the  circumstances  which 
surround  him,  and  in  particular  by  the  practical  exigencies  of 
which  his  fellows  feel  the  strain.  This  connection  of  theory 
with  practice  has  its  advantages  and  its  dangers.  It  tends  to 
give  a  real  and  positive  character  to  theoretic  inquiry ;  but  it 
may  also  be  expected  to  produce  exaggerations  in  doctrine,  to 
lend  undue  prominence  to  particular  sides  of  the  truth,  and 
to  make  transitory  situations  or  temporary  expedients  be  re- 
garded as  universally  normal  conditions. 

There  are  other  relations  which  we  must  not  overlook  in 
tracing  the  progress  of  economic  opinion.  The  several  branches 
of  the  science  of  society  are  so  closely  connected  that  the 


4  POLITICAL  ECONOMY. 

history  of  no  one  of  them  can  with  perfect  rationality  be 
treated  apart,  though  such  a  treatment  is  recommended — indeed 
necessitated — by  practical  utility.  The  movement  of  economic 
thought  is  constantly  and  powerfully  affected  by  the  prevalent 
mode  of  thinking,  and  even  the  habitual  tone  of  sentiment, 
on  social  subjects  generally.  All  the  intellectual  manifesta- 
tions of  a  period  in  relation  to  human  questions  have  a  kindred 
character,  and  bear  a  certain  stamp  of  homogeneity,  which  is 
vaguely  present  to  our  minds  when  we  speak  of  the  spirit  of 
the  age.  Social  speculation  again,  and  economic  research  as 
one  branch  of  it,  is  both  through  its  philosophic  method  and 
through  its  doctrine  under  the  influence  of  the  sciences  which 
in  the  order  of  development  precede  the  social,  especially  of 
the  science  of  organic  nature. 

It  is  of  the  highest  importance  to  bear  in  mind  these  several 
relations  of  economic  research  both,  to  external  circumstance 
and  to  other  spheres  of  contemporary  thought,  because  by 
keeping  them  in  view  we  shall  be  led  to  form  less  absolute 
and  therefore  juster  estimates  of  the  successive  phases  of 
opinion.  Instead  of  merely  praising  or  blaming  these  accord- 
ing to  the  degrees  of  their  accordance  with  a  predetermined 
standard  of  doctrine,  we  shall  view  them  as  elements  in  an 
ordered  series,  to  be  studied  mainly  with  respect  to  their  filia- 
tion, their  opportuneness,  and  their  influences.  We  shall  not 
regard  each  new  step  in  this  theoretic  development  as  implying 
an  unconditional  negation  of  earlier  views,  which  often  had  a 
relative  justification,  resting,  as  they  did,  on  a  real,  though 
narrower,  basis  of  experience,  or  assuming  the  existence  of  a 
different  social  order.  Nor  shall  we  consider  all  the  theoretic 
positions  now  occupied  as  definitive  ;  for  the  practical  system  of 
life  which  they  tacitly  assume  is  itself  susceptible  of  change, 
and  destined,  without  doubt,  more  or  less  to  undergo  it. 
Within  the  limits-of  a  sketch  like  the  present  these  considera- 
tions cannot  be  fully  worked  out ;  but  an  effort  will  be  made 
to  keep  them  in  view,  and  to  mark  the  relations  here  indicated, 
wherever  their  influence  is  specially  important  or  interesting. 


INTRODUCTORY.  5 

The  particular  situation  and  tendencies  of  the  several 
thinkers  whose  names  are  associated  with  economic  doctrines 
have,  of  course,  modified  in  a  greater  or  less  degree  the  spirit 
or  form  of  those  doctrines.  Their  relation  to  special  prede- 
cessors, their  native  temperament,  their  early  training,  their 
religious  prepossessions  and  political  partialities,  have  all  had 
their  effects.  To  these  we  shall  in  some  remarkable  instances 
direct  attention ;  but,  in  the  main,  they  are,  for  our  present 
purpose,  secondary  and  subordinate.  The  ensemble  must  pre- 
ponderate over  the  individual ;  and  the  constructors  of  theories 
must  be  regarded  as  organs  of  a  common  intellectual  and  social 
movement. 

The  history  of  economic  inquiry  is  most  naturally  divided 
into  the  three  great  periods  of  (i)  the  ancient,  (2)  the  mediaeval, 
and  (3)  the  modern  worlds.  In  the  two  former,  this  branch 
of  study  could  exist  only  in  a  rudimentary  state,  jt  js  evident 
that  for  any  considerable  development  of  social  theory-Two 
conditions  must  be  fulfilled.  First,  the  phenomena  must  have 
exhibited  themselves  on  a  sufficiently  extended  scale  to  supply 
adequate  matter  for  observation,  and  afford  a  satisfactory  basis 
for  scientific  generalisations ;  and  secondly,  whilst  the  spectacle 
is  thus  provided,  the  spectator  must  have  been  trained  for  his 
task,  and  armed  with  the  appropriate  aids  and  instruments  of 
research,  that  is  to  say,  there  must  have  been  such  a  previous 
cultivation  of  the  simpler  sciences  as  will  have  both  furnished 
the  necessary  data  of  doctrine  and  prepared  the  proper  methods 
of  investigation.  Sociology  requires  to  use  for  its  purposes 
theorems  which  belong  to  the  domains  of  physics  and  biology, 
and  which  it  must  borrow  from  their  professors ;  and,  on  the 
logical  side,  the  methods  which  it  has  to  employ — deductive, 
observational,  comparative — must  have  been  previously  shaped 
in  the  cultivation  of  mathematics  and  the  study  of  the 
inorganic  world  or  of  organisms  less  complex  than  the  social 
Hence  it  is  plain  that,  though  some  laws  or  tendencies  of 
society  must  have  been  forced  on  men's  attention  in  every  age 
by  practical  exigencies  which  could  not  be  postponed,  and 


6  POLITICAL  ECONOMY. 

though  the  questions  thus  raised  must  have  received  some 
empirical  solution,  a  really  scientific  sociology  must  be  the 
product  of  a  very  advanced  stage  of  intellectual  development. 
And  this  is  true  of  the  economic,  as  of  other  branches  of  social 
theory.  We  shall  therefore  content  ourselves  with  a  general 
outline  of  the  character  of  economic  thought  in  antiquity  and 
the  Middle  Ages,  and  of  the  conditions  which  detern  j «./  ed  that 
character. 


CHAPTER  IL 

ANCIENT  TIMES. 

THE  earliest  surviving  expressions  of  thought  on  economic 
subjects  have  come  down  to  us  from  the  Oriental  theocracies. 
The  general  spirit  of  the  corresponding  type  of  social  life  con- 
sisted in  taking  imitation  for  the  fundamental  principle  of 
education,  and  consolidating  nascent  civilisation  hy  heredity 
of  the  different  functions  and  professions,  or  even  by  a  system 
of  castes,  hierarchically  subordinated  to  each  other  according 
to  the  nature  of  their  respective  offices,  under  the  common 
supreme  direction  of  the  sacerdotal  caste.  This  last  was 
charged  with  the  traditional  stock  of  conceptions,  and  their 
application  for  purposes  of  discipline.  It  sought  to  realise  a 
complete  regulation  of  human  life  in  all  its  departments  on 
the  basis  of  this  transmitted  body  of  practical  ideas.  Con- 
servation is  the  principal  task  of  this  social  order,  and  its  most 
remarkable  quality  is  stability,  which  tends  to  degenerate  into 
stagnation.  But  there  can  Jbe  no  doubt  that  the  useful  arts 
were  long,  though  slowly,  progressive  under  this  regime,  from 
which  they  were  inherited  by  the  later  civilisations, — the 
system  of  classes  or  castes  maintaining  the  degree  of  division 
of  labour  which  had  been  reached  in  those  early  periods.  The 
leading  members  of  the  corporations  which  presided  over  the 
theocracies  without  doubt  gave  much  earnest  thought  to  the 
conduct  of  industry,  which,  unlike  war,  did  not  imperil  their 
political  pre-eminence  by  developing  a  rival  class.  But,  con- 
ceiving life  as  a  whole,  and  making  its  regulation  their  primary 
aim,  they  naturally  considered  most  the  social  reactions  which 


8  POLITICAL  ECONOMY. 

industry  is  fitted  to  exercise.  The  moral  side  of  economics  is 
the  one  they  habitually  contemplate,  or  (what  is  not  the  same) 
the  economic  side  of  morals.  They  abound  in  those  warnings 
against  greed  and  the  haste  to  be  rich  which  religion  and 
philosophy  have  in  all  ages  seen  to  be  necessary.  They  insist 
on  honesty  in  mutual  dealings,  on  just  weights  and  measures, 
on  the  faithful  observance  of  contracts.  They  admonish  against 
the  pride  and  arrogance  apt  to  be  generated  by  riches,  against 
undue  prodigality  and  self-indulgence,  and  enforce  the  duties 
of  justice  and  beneficence  towards  servants  and  inferiors. 
Whilst,  in  accordance  with  the  theological  spirit,  the  personal 
acquisition  of  wealth  is  in  general  thesis  represented  as  deter- 
mined by  divine  wills,  its  dependence  on  individual  diligence 
and  thrift  is  emphatically  taught.  There  is  indeed  in  the  fully 
developed  theocratic  systems  a  tendency  to  carry  precept, 
which  there  differs  little  from  command,  to  an  excessive  degree 
of  minuteness, — to  prescribe  in  detail  the  time,  the  mode,  and 
the  accompaniments  of  almost  every  act  of  every  member  of 
the  community.  This  system  of  exaggerated  surveillance  is 
connected  with  the  union,  or  rather  confusion,  of  the  spiritual 
and  temporal  powers,  whence  it  results  that  many  parts  of  the 
government  of  society  are  conducted  by  direct  injunction  or 
restraint,  which  at  a  later  stage  are  intrusted  to  general  intel- 
lectual and  moral  influences. 

The  practical  economic  enterprises  of  Greek  and  Roman 
antiquity  could  not,  even  independently  of  any  special  adverse 
influences,  have  competed  in  magnitude  of  scale  or  variety  of 
resource  with  those  of  modern  times.  (The  unadvanced  con- 
dition of  physical  science  prevented  a  large  application  of  the 
i  less  obvious  natural  powers  to  production,  or  the  extensive 
use  of  machinery,  which  has  acquired  such  an  immense 
development  as  a  factor  in  modern  industry.  J/ The  imper- 
fection of  geographical  knowledge  and  of  the  means  of  com- 
<?2-  munication  and  transport  were  impediments  to  the  growth 
of  foreign  commerce,  ]  These  obstacles  arose  necessarily  out 
of  the  mere  immaturity  of  the  industrial  life  of  the  periods  in 


ANCIENT  TIMES.  9 

question.  But  more  deeply  rooted  impediments  to  a  vigorous 
and  expansive  economic  practical  system  existed  in  the  char- 
acteristic principles  of  the  civilisation  of  antiquity.  Some 
writers  have  attempted  to  set  aside  the  distinction  between 
the  ancient  and  modern  worlds  as  imaginary  or  unimportant, 
and,  whilst  admitting  the  broad  separation  between  ourselves 
and  the  theocratic  peoples  of  the  East,  to  represent  the  Greeks 
and  Komans  as  standing  on  a  substantially  similar  ground  of 
thought,  feeling,  and  action  with  the  Western  populations  of 
our  own  time.  But  this  is  a  serious  error,  arising  from  the 
same  too  exclusive  preoccupation  with  the  cultivated  classes 
and  with  the  mere  speculative  intellect  which  has  often  led 
to  an  undue  disparagement  of  the  Middle  Ages.  There_ia 
this  essential  difference  between  the  spirit  and  life  of  ancient 
and  of  modern  communities,  that  the  former  were  organised 
for  war,  the  latter  during  their  whole  history  have  increasingly 
jended  to  be  organised  for  industry,  as  their  practical  end  and 
aim.  The  profound  influence  of  these  differing  conditions  on 
every  form  of  human  activity  must  never  be  overlooked  or 
forgotten.  With  the  military  constitution  of  ancient  societies 
the  institution  of  slavery  was  essentially  connected.  Far  from 
being  an  excrescence  on  the  contemporary  system  of  life,  as 
it  was  in  the  modern  West  Indies  or  the  United  States  of 
America,  it  was  so  entirely  in  harmony  with  that  life  that  the 
most  eminent  thinkers  regarded  it  as  no  less  indispensable 
than  inevitable.  It  does,  indeed,  seem  to  have  been  a  tem- 
porary necessity,  and  on  the  whole,  regard  being  had  to  what 
might  have  taken  its  place,  a  relative  good.  But  it  was 
attended  with  manifold  evils.  It  led  to  the  prevalence 
amongst  the  citizen  class  of  a  contempt  for  industrial  occupa- 
tions ;  every  form  of  production,  with  a  partial  exception  in 
favour  of  agriculture,  was  branded  as  unworthy  of  a  free  man, 
— the  only  noble  forms  of  activity  being  those  directly  con- 
nected with  public  life,  whether  military  or  administrative. 
Labour  was  degraded  by  the  relegation  of  most  departments 
of  it  to  the  servile  class,  above  whom  the  free  artisans  were 


io  POLITICAL  ECONOMY. 

but  little  elevated  in  general  esteem.  The  producers  being 
thus  for  the  most  part  destitute  of  intellectual  cultivation  and 
excluded  from  any  share  in  civic  ideas,  interests,  or  efforts, 
were  unfitted  in  character  as  well  as  by  position  for  the  habits 
of  skilful  combination  and  vigorous  initiation  which  the  prog- 
ress of  industry  demands.  To  this  must  be  added  that  the 
comparative  insecurity  of  life  and  property  arising  out  of 
military  habits,  and  the  consequent  risks  which  attended 
accumulation,  were  grave  obstructions  to  the  formation  of 
large  capitals,  and  to  the  establishment  of  an  effective  system 
of  credit.  These  causes  conspired  with  the  undeveloped  state 
of  knowledge  and  of  social  relations  in  giving  to  the  economic 
life  of  the  ancients  the  limitation  and  monotony  which  con- 
trast so  strongly  with  the  inexhaustible  resource,  the  ceaseless 
expansion,  and  the  thousandfold  variety  of  the  same  activities 
in  the  modem  world.  It  is,  of  course,  absurd  to  expect  in- 
compatible qualities  in  any  social  system ;  each  system  must 
be  estimated  according  to  the  work  it  has  to  do.  Now  the 
historical  vocation  of  the  ancient  civilisation  was  to  be  accom- 
plished, not  through  industry,  but  through  war,  which  was  in 
the  end  to  create  a  condition  of  things  admitting  of  its  own 
elimination  and  of  the  foundation  of  a  regime  based  on  pacific 
activity. 

THE  GREEKS. 

This  office  was,  however,  reserved  for  Rome,  as  the  final 
result  of  her  system  of  conquest;  the  military  activity  of 
Greece,  though  continuous,  was  incoherent  and  sterile,  except 
in  the  defence  against  Persia,  and  did  not  issue  in  the  accom- 
plishment of  any  such  social  mission.  It  was,  doubtless,  the 
inadequacy  of  the  warrior  life,  under  these  conditions,  to 
absorb  the  faculties  of  the  race,  that  threw  the  energies  of  its 
most  eminent  members  into  the  channel  of  intellectual  activity, 
and  produced  a  singularly  rapid  evolution  of  the  aesthetic, 
philosophic,  and  scientific  germs  transmitted  by  the  theocratic 
societies. 


ANCIENT  TIMES.  TI 

In  the  Works  and  Days  of  Hesiod,  we  find  an  order  ol 
thinking  in  the  economic  sphere  very  similar  to  that  of  the 
theocracies.  With  a  recognition  of  the  divine  disposing  power, 
and  traditional  rules  of  sacerdotal  origin,  is  combined  practical 
sagacity  embodied  in  precept  or  proverbial  saying.  But  the 
development  of  abstract  thought,  beginning  from  the  time  of 
Thales,  soon  gives  to  Greek  culture  its  characteristic  form,  and 
marks  a  new  epoch  in  the  intellectual  history  of  mankind. 

The  movement  was  now  begun,  destined  to  mould  the 
whole  future  of  humanity,  which,  gradually  sapping  the  old 
hereditary  structure  of  theological  convictions,  tended  to  the 
substitution  of  rational  theories  in  every  department  of  specu- 
lation. The  eminent  Greek  thinkers,  while  taking  a  deep 
interest  in  the  rise  of  positive  science,  and  most  of  them  study- 
ing the  only  science — that  of  geometry — then  assuming  its 
definitive  character,  were  led  by  the  social  exigencies  which 
always  powerfully  affect  great  minds  to  study  with  special 
care  the  nature  of  man  and  the  conditions  of  his  existence  in 
society.  These  studies  were  indeed  essentially  premature;  a 
long  development  of  the  inorganic  and  vital  sciences  was 
necessary  before  sociology  or  morals  could  attain  their  normal 
constitution.  But  by  their  prosecution  amongst  the  Greeks 
A  noble  intellectual  activity  was  kept  alive,  and  many  of  those 
partial  lights  obtained  for  which  mankind  cannot  afford  to 
wait.  Economic  inquiries,  along  with  others,  tended  towards 
rationality ;  Plutus  was  dethroned,  and  terrestrial  substituted 
for  supernatural  agencies.  But  such  inquiries,  resting  on  no 
sufficiently  large  basis  of  practical  life,  could  not  attain  any 
considerable  results.  The  military  constitution  of  society,  and 
the  existence  of  slavery,  which  was  related  to  it,  leading,  as 
has  been  shown,  to  a  low  estimate  of  productive  industry, 
turned  away  the  habitual  attention  of  thinkers  from  that 
domain.  On  the  other  hand,  the  absorption  of  citizens  in  the 
life  of  the  state,  and  their  pre-occupation  with  party  struggles, 
brought  questions  relating  to  politics,  properly  so  called,  into 
special  prominence.  The  principal  writers  on  social  subjects 


12  POLITICAL  ECONOMY. 

are  therefore  almost  exclusively  occupied  with  the  examination 
and  comparison  of  political  constitutions,  and  with  the  search 
after  the  education  best  adapted  to  train  the  citizen  for  public 
functions.  And  we  find,  accordingly,  in  them  no  systematic  or 
adequate  handling  of  economic  questions, — only  some  happy 
ideas  and  striking  partial  anticipations  of  later  research. 

In  their  thinking  on  such  questions,  as  on  all  sociological 
subjects,  the  following  general  features  are  observable. 

1.  The  individual  is  conceived  as  subordinated  to  the  state, 
through  which  alone  his  nature  can  be  developed  and  com- 
pleted,  and   to   the   maintenance   and   service  of   which  all 
his  efforts  must  be  directed.     The  great  aim  of  all  political 
thought  is  the  formation  of  good  citizens ;  every  social  ques- 
tion is  studied  primarily  from  the  ethical  and  educational 
point  of  view.     The  citizen  is  not  regarded  as  a  producer,  but 
only  as  a  possessor,  of  material  wealth ;  and  this  wealth  is  not 
esteemed  for  its  own  sake  or  for  the  enjoyments  it  procures, 
but  for  the  higher  moral  and  public  aims  to  which  it  may  be 
made  subservient. 

2.  The  state,  therefore,  claims  and  exercises  a  controlling 
And   regulating   authority  over   every  sphere   of   social  life, 
including  the  economic,  in  order  to  bring  individual  action 
into  harmony  with  the  good  of  the  whole. 

3.  With  these  fundamental  notions  is  combined  a  tendency 
to  attribute  to  institutions  and  to  legislation  an  unlimited 
efficacy,   as   if   society  had   no   spontaneous  tendencies,   but 
•would  obey  any  external  impulse,  if  impressed  upon  it  with 
sufficient  force  and  continuity. 

Every  eminent  social  speculator  had  his  ideal  state,  which 
approximated  to  or  diverged  from  the  actual  or  possible, 
according  to  the  degree  in  which  a  sense  of  reality  and  a 
positive  habit  of  thinking  characterised  the  author. 

The  most  celebrated  of  these  ideal  systems  is  that  of  Plato. 
In  it  the  idea  of  the  subordination  of  the  individual  to  the 
state  appears  in  its  most  extreme  form.  Within  that  class  of 
the  citizens  of  his  republic  who  represent  the  highest  type  of 


ANCIENT  TIMES.  13 

life,  community  of  property  and  of  wives  is  established,  as 
the  most  effective  means  of  suppressing  the  sense  of  private 
interest,  and  consecrating  the  individual  entirely  to  the  public 
service.  It  cannot  perhaps  be  truly  said  that  his  scheme  was 
incapable  of  realisation  in  an  ancient  community  favourably 
situated  for  the  purpose.  But  it  would  soon  be  broken  to 
pieces  by  the  forces  which  would  be  developed  in  an  industrial 
society.  It  has,  however,  been  the  fruitful  parent  of  modern 
Utopias,  specially  attractive  as  it  is  to  minds  in  which  the 


literary  instinct  is  stronger  than  the  scientific  judgment,  in 
consequence  of  the  freshness  and  brilliancy  of  Plato's  exposi- 
tion and  the  unrivalled  charm  of  his  style.  Mixed  wivh  what 
we  should  call  the  chimerical  ideas  in  his  work,  there  are 
many  striking  and  elevated  moral  conceptions,  and,  what  is 
more  to  our  present  purpose,  some  just  economic  analyses.  In 
particular,  he  gives  a  correct  account  of  the  division  and  com- 
bination of  employments,  as  they  naturally  arise  in  society. 
The  foundation  of  the  social  organisation  he  traces,  perhaps, 
too  exclusively  to  economic  grounds,  not  giving  sufficient 
weight  to  the  disinterested  social  impulses  in  men  which  tend 
to  draw  and  bind  them  together.  But  he  explains  clearly  how 
the  different  wants  and  capacities  of  individuals  demand  and 
give  rise  to  mutual  services,  and  how,  by  the  restriction  of 
each  to  the  sort  of  occupation  to  which,  by  his  position, 
abilities,  and  training,  he  is  best  adapted,  everything  needful 
for  the  whole  is  more  easily  and  better  produced  or  effected. 
In  the  spirit  of  all  the  ancient  legislators  he  desires  a  self- 
sufficing  state,  protected  from  unnecessary  contacts  with 
foreign  populations,  which  might  tend  to  break  down  its 
internal  organisation  or  to  deteriorate  the  national  character. 
Hence  he  discountenances  foreign  trade,  and  with  this  view 
removes  his  ideal  city  to  some  distance  from  the  sea.  The 
limits  of  its  territory  are  rigidly  fixed,  and  the  population  is  f 
restricted  by  the  prohibition  of  early  marriages,  by  Jhe  ex-  . 
posure  of  infants,  and  by  the  maintenance  of  a  determinate  ^ 
number  of  individual  lots  of  land  in  the  hands  of  the  citizens 


14  POLITICAL  ECONOMY. 

who  cultivate  the  soil.  These  precautions  are  inspired  more 
by  political  and  moral  motives  than  by  the  Maltliusian  feai 
of  failure  of  subsistence.  Plato  aims,  as  far  as  possible,  at 
equality  of  property  amongst  the  families  of  the  community 
which  are  engaged  in  the  immediate  prosecution  of  industry. 
This  last  class,  as  distinguished  from  the  governing  and 
military  classes,  he  holds,  according  to  the  spirit  of  his  age,  in 
but  little  esteem ;  he  regards  their  habitual  occupations  as 
lending  to  the  degradation  of  the  mind  and  the  enfeeblement 
of  the  body,  and  rendering  those  who  follow  them  unfit  for 
the  higher  duties  of  men  and  citizens.  The  lowest  forms  of 
labour  he  would  commit  to  foreigners  and  slaves.  Again,  in 
the  spirit  of  ancient  theory,  he  wishes  (Legg.,  v.  12)  to  banish 
the  precious  metals,  as  far  as  practicable,  from  use  in  internal 
commerce,  and  forbids  the  lending  of  money  on  interest, 
leaving  indeed  to  the  free  will  of  the  debtor  even  the  repay- 
ment of  the  capital  of  the  loan.  All  economic  dealings  he 
subjects  to  active  control  on  the  part  of  the  Government,  not 
merely  to  prevent  violence  and  fraud,  but  to  check  the  growth 
of  luxurious  habits,  and  secure  to  the  population  of  the  state 
a  due  supply  of  the  necessaries  and  comforts  of  life. 

Contrasted  with  the  exaggerated  idealism  of  Plato  is  the 
somewhat  limited  but  eminently  practical  genius  of  Xenophon. 
In  him  the  man  of  action  predominates,  but  he  has  also  a  large 
element  of  the  speculative  tendency  and  talent  of  the  Greek. 
His  treatise  entitled  (Economicus  is  well  worth  reading  for  the 
interesting  and  animated  picture  it  presents  of  some  aspects  of 
contemporary  life,  and  is  justly  praised  by  Sismondi  for  the 
spirit  of  mild  philanthropy  and  tender  piety  which  breathes 
through  it.  But  it  scarcely  passes  beyond  the  bounds  of 
domestic  economy,  though  within  that  limit  its  author 
exhibits  much  sound  sense  and  sagacity.  His  precepts  for 
the  judicious  conduct  of  private  property  do  not  concern  us 
here,  nor  his  wise  suggestions  for  the  government  of  the 
family  and  its  dependants.  Yet  it  is  in  this  narrower  sphere 
and  in  general  in  the  concrete  domain  that  his  chief  excellence 


ANCIENT  TIMES.  15 

lies ;  to  economics  in  their  wider  aspects  he  does  not  con- 
tribute much.  He  shares  the  ordinary  preference  of  his  fellow- 
countrymen  for  agriculture  over  other  employments,  and  is, 
indeed,  enthusiastic  in  his  praises  of  it  as  developing  patriotic 
and  religious  feeling  and  a  respect  for  property,  as  furnishing 
the  best  preparation  for  military  life,  and  as  leaving  sufficient 
time  and  thought  disposable  to  admit  of  considerable  intel- 
lectual and  political  activity.  Yet  his  practical  sense  leads 
him  to  attribute  greater  importance  than  most  other  Greek 
writers  tomanui'actures,  and  still  more  to  trade,  to  enter  more 
largely  on  questions  relating  to  their  conditions  and  develop- 
ment, and  to  bespeak  for  them  the  countenance  and  protection 
of  the  state.  Though  his  views  on  the  nature  of  money  are 
vague,  and  in  some  respects  erroneous,  he  sees  that  its  export 
in  exchange  for  commodities  will  not  impoverish  the  com- 
munity. He  also  insists  on  the  necessity,  with  a  view  to 
a  flourishing  commerce  with  other  countries,  of  peace,  of  a 
courteous  and  respectful  treatment  of  foreign  traders,  and  of  a 
prompt  and  equitable  decision  of  their  legal  suits.  The  insti- 
tution of  slavery  he  of  course  recognises  and  does  not  dis- 
approve ;  he  even  recommends,  for  the  increase  of  the  Attic 
revenues,  the  hiring  out  of  slaves  by  the  state  for  labour  in 
the  mines,  after  branding  them  to  prevent  their  escape,  the 
number  of  slaves  being  constantly  increased  by  fresh  purchases 
out  of  the  gains  of  the  enterprise.  (De  Vect.,  3,  4.) 

Almost  the  whole  system  of  Greek  ideas  up  to  the  time 
of  Aristotle  is  represented  in  his  encyclopaedic  construction. 
Mathematical  and  astronomical  science  was  largely  developed 
at  a  later  stage,  but  in  the  field  of  social  studies  no  higher 
point  was  ever  attained  by  the  Greeks  than  is  reached  in  the 
writings  of  this  great  thinker.  Both  his  gifts  and  his  situa- 
tion eminently  favoured  him  in  the  treatment  of  these 
subjects.  He  combined  in  rare  measure  a  capacity  for  keen 
observation  with  generalising  power,  and  sobriety  of  judgment 
with  ardour  for  the  public  good.  All  that  was  original  or 
significant  in  the  political  life  of  Hellas  had  run  its  course 


16  POLITICAL  ECONOMY. 

before  his  time  or  under  his  own  eyes,  and  he  had  thus  a  laiga 
basis  of  varied  experience  on  which  to  ground  his  conclusions. 
Standing  outside  the  actual  movement  of  contemporary  public 
life,  he  occupied  the  position  of  thoughtful  spectator  and 
impartial  judge.  He  could  not,  indeed,  for  reasons  already 
stated,  any  more  than  other  Greek  speculators,  attain  a  fully 
normal  attitude  in  these  researches.  Nor  could  he  pass 
beyond  the  sphere  of  what  is  now  called  statical  sociology ; 
the  idea  of  laws  of  the  historical  development  of  social 
phenomena  he  scarcely  apprehended,  except  in  some  small 
degree  in  relation  to  the  succession  of  political  forms.  J3ut 
there  is  to  be  found  in  his  writings  a  remarkable  body  of 
sound  and  valuable  thoughts  on  the  constitution  and  work- 
ing of  the  social  organism.  The  special  notices  of  economic 
subjects  are  neither  so  numerous  nor  so  detailed  as  we  should 
desire.  Like  all  the  Greek  thinkers,  he  recognises  but  one 
doctrine  of  the  state,  under  which  ethics,  politics  proper,  and 
economics  take  their  place  as  departments,  bearing  to  each 
other  a  very  close  relation,  and  having  indeed  their  lines  of 
demarcation  from  each  other  not  very  distinctly  marked. 
When  wealth  comes  under  consideration,  it  is  studied  not  as 
an  end  in  itself,  but  with  a  view  to  the  higher  elements  and 
ultimate  aims  of  the  collective  life. 

The  origin  of  society  he  traces,  not  to  economic  necessities, 
but  to  natural  social  impulses  in  the  human  constitution. 
The  nature  of  the  social  union,  when  thus  established,  being 
determined  by  the  partly  spontaneous  partly  systematic  com- 
bination of  diverse  activities,  he  respects  the  independence  of  the 
latter  whilst  seeking  to  effect  their  convergence.  He  therefore 
opposes  himself  to  the  suppression  of  personal  freedom  and 
initiative,  and  the  excessive  subordination  of  the  individual  to 
the  state,  and  rejects  the  community  of  property  and  wives 
proposed  by  Plato  for  his  governing  class.  The  principle  of 
private  property  he  regards  as  deeply  rooted  in  man,  and  the 
evils  which  are  alleged  to  result  from  the  corresponding  social 
ordinance  he  thinks  ought  really  to  be  attributed  either  to  the 


ANCIENT  TIMES.  17 

imperfections  of  our  nature  or  to  the  vices  of  other  public 
institutions.  Community  of  goods  must,  in  his  view,  tend  to 
neglect  of  the  common  interest  and  to  the  disturbance  of  social 


larmon 

— — »- 

Of  the  several  classes  which  provide  for  the  different  wants 
cf  the  society,  those  who  are  occupied  directly  with  its  material 
needs — the  immediate  cultivators  of  the  soil,  the  mechanics  and 
artificers — are  excluded  from  any  share  in  the  government  of 
the  state,  as  being  without  the  necessary  leisure  and  cultivation, 
and  apt  to  be  debased  by  the  nature  of  their  occupations.  In 
a  celebrated  passage  he  propounds  a  theory  of  slavery,  in  which 
it  is  based  on  the  universality  of  the  relation  between  command 
and  obedience,  and  on  the  natural  division  by  which  the  ruling 
is  marked  off  from  the  subject  race.  He  regards  the  slave  as 
having  no  independent  will,  but  as  an  "  animated  tool  "  in  the 
hands  of  his  master ;  and  in  his  subjection  to  such  control,  if 
only  it  be  intelligent,  Aristotle  holds  that  the  true  well-being 
of  the  inferior  as  well  as  of  the  superior  is  to  be  found.  This 
view,  so  shocking  to  our  modern  sentiment,  is  of  course  not 
personal  to  Aristotle ;  it  is  simply  the  theoretic  presentation 
of  the  facts  of  Greek  life,  in  which  the  existence  of  a  body  of 
citizens  pursuing  the  higher  culture  and  devoted  to  the  tasks 
of  war  and  government  was  founded  on  the  systematic  degra- 
dation of  a  wronged  and  despised  class,  excluded  from  all  the 
higher  offices  of  human  beings  and  sacrificed  to  the  mainten- 
ance of  a  special  type  of  society.1 

The  methods  of  economic  acquisition  are  divided  by  Aristotle 
into  two,  one  of  which  has  for  its  aim  the  appropriation  of 
natural  products  and  their  application  to  the  material  uses  of  / 
the  household  ;  under  this  head  come  hunting,  fishing,  cattle- 
rearing,  and  agriculture.  With  this  primary  and  '•  natural " 
method  is,  in  some  sense,  contrasted  the  other  to  which 
Aristotle  gives  the  name  of  "  chrematistic,"  in  which  an  active 
exchange  of  products  goes  on,  and  money  conies  into  opera- 
tion as  its  medium  and  regulator.  A  certain  measure  of  this 
"  non-natural "  method,  as  it  may  be  termed  in  opposition  to 

B 


ig  POLITICAL  ECONOMY. 

the  preceding  and  simpler  form  of  industrial  life,  is  accepted 
by  Aristotle  as  a  necessary  extension  of  the  latter,  arising  out 
of  increased  activity  of  intercourse,  and  satisfying  real  wants. 
But  its  development  on  the  great  scale,  founded  on  the  thirst 
for  enjoyment  and  the  unlimited  desire  of  gain,  he  condemns 
as  unworthy  and  corrupting.  Though  his  views  on  this  subject 
appear  to  be  principally  based  on  moral  grounds,  there  are 
some  indications  of  his  having  entertained  the  erroneous  opinion 
held  by  the  physiocrats  of  the  eighteenth  century,  that  agri- 
culture alone  (with  the  kindred  arts  above  joined  with  it)  is 
truly  productive,  whilst  the  other  kinds  of  industry,  which 
either  modify  the  products  of  nature  or  distribute  them  by 
way  of  exchange,  however  convenient  and  useful  they  may  be, 
make  no  addition  to  the  wealth  of  the  community. 

He  rightly  regards  money  as  altogether  different  from  wealth, 
illustrating  the  difference  by  the  story  of  Midas.  And  he 
seems  to  have  seen  that  money,  though  its  use  rests  on  a  social 
convention,  must  be  composed  of  a  material  possessing  an 
independent  value  of  its  own.  That  his  views  on  capital  were 
indistinct  appears  from  his  famous  argument  against  interest 
on  loans,  which  is  based  on  the  idea  that  money  is  barren  and 
cannot  produce  money. 

Like  the  other  Greek  social  philosophers,  Aristotle  recom- 
mends to  the  care  of  Governments  the  preservation  of  a  due 
proportion  between  the  extent  of  the  civic  territory  and  its 
population,  and  relies  on  ante-nuptial  continence,  late  marriages, 
and  the  prevention  or  destruction  of  births  for  the  due  limita- 
tion of  the  number  of  citizens,  the  insufficiency  of  the  latter 
being  dangerous  to  the  independence  and  its  superabundance 
to  the  tranquillity  and  good  order  of  the  state. 

THE  ROMANS. 

Notwithstanding  the  eminently  practical,  realistic,  and  utili- 
tarian character  of  the  Romans,  there  was  no  energetic  exercise 
of  their  powers  in  the  economic  field ;  they  developed  no 


ANCIENT  TIMES.  19 

large  and  many-sided  system  of  production  and  exchange. 
Their  historic  mission  was  military  and  political,  and  the 
national  energies  \vero  mainly  devoted  to  the  public  service 
at  home  and  in  the  field.  To  agriculture,  indeed,  much 
attention  was  given  from  the  earliest  times,  and  on  it  was 
founded  the  existence  of  the  hardy  population  which  won 
the  first  steps  in  the  march  to  universal  dominion.  But  in 
the  course  of  their  history  the  cultivation  of  the  soil  by  a 
native  yeomanry  gave  place  to  the  introduction,  in  great 
numhers,  of  slave  labourers  acquired  by  their  foreign  con- 
quests ;  and  for  the  small  properties  of  the  earlier  period  were 
substituted  the  vast  estates — the  latifundia — which,  in  the 
judgment  of  Pliny,  were  the  ruin  of  Italy.1  The  industrial 
arts  and  commerce  (the  latter,  at  least  when  not  conducted  on 
a  great  scale)  they  regarded  as  ignoble  pursuits,  unworthy  of 
free  citizens ;  and  this  feeling  of  contempt  was  not  merely  a 
prejudice  of  narrow  or  uninstrticted  minds,  but  was  shared  by 
Cicero  and  others  among  the  most  liberal  spirits  of  the  nation.2 
As  might  be  expected  from  the  want  of  speculative  originality 
among  the  Romans,  there  is  little  evidence  of  serious  theoretic 
inquiry  on  economic  subjects.  Their  ideas  on  these  as  on 
other  social  questions  were  for  the  most  part  borrowed  from 
the  Greek  thinkers.  Such  traces  of  economic  thought  as  do 
occur  are  to  be  found  in  (i)  the  philosophers,  (2)  the  writers 
de  re  rustica,  and  (3)  the  jurists.  It  must,  however,  be  ad- 
mitted that  many  of  the  passages  in  these  authors  referred  to 
by  those  who  assert  the  claim  of  the  Romans  to  a  more  pro- 
minent place  in  the  history  of  the  science  often  contain  only 
obvious  truths  or  vague  generalities. 

1  "Locis,  quae  nunc,  vix  seminario  exiguo  militum  relicto,  servitia 
Romana  ab  solitudine  vindicant." — Liv.  vi.  12.  "Villarum  infimta 
spatia."  Tac.  Ann.  iii.  53. 

3  "Opifices  omnes  in  sordida  arte  versantur;  nee  enim  quidquam 
ingenuum  habere  potest  officina. "  Cic.  de  Off.  i.  42.  "  Mercatura,  si 
teuuis  est,  sordida  putanda  est :  sin  magna  et  copiosa,  multa  undique 
apportans  multisque  sine  vanitate  impertiens,  non  est  admodum  vituper- 
anda." — Ibid.  "Qusestusomnis  Patribus  indecorus  visus  est."  Liv.  xxi.63- 


20  POLITICAL  ECONOMY. 

In  the  philosophers,  whom  Cicero,  Seneca,  and  the  eldei 
Pliny  sufficiently  represent  (the  last  indeed  being  rather  a 
learned  encyclopaedist  or  polyhistor  than  a  philosopher),  we 
find  a  general  consciousness  of  the  decay  of  industry,  the 
relaxation  of  morals,  and  the  growing  spirit  of  self-indulgence 
amongst  their  contemporaries,  who  are  represented  as  deeply 
tainted  with  the  imported  vices  of  the  conquered  nations. 
This  sentiment,  hoth  in  these  writers  and  in  the  poetry  and 
miscellaneous  literature  of  their  times,  is  accompanied  by  a 
half-factitious  enthusiasm  for  agriculture  and  an  exaggerated 
estimate  of  country  life  and  of  early  Roman  habits,  which  are 
principally,  no  doubt,  to  be  regarded  as  a  form  of  protest 
against  existing  abuses,  and,  from  this  point  of  view,  remind 
us  of  the  declamations  of  Rousseau  in  a  not  dissimilar  age. 
But  there  is  little  of  large  or  just  thinking  on  the  prevalent 
economic  evils  and  their  proper  remedies.  Pliny,  still  further 
in  the  spirit  of  Rousseau,  is  of  opinion  that  the  introduction 
of  gold  as  a  medium  of  exchange  was  a  thing  to  be  deplored, 
and  that  the  age  of  barter  was  preferable  to  that  of  money. 
He  expresses  views  on  the  necessity  of  preventing  the  efflux 
of  money  similar  to  those  of  the  modern  mercantile  school — 
views  which  Cicero  also,  though  not  so  clearly,  appears  to 
have  entertained.  Cato,  Varro,  and  Columella  concern  them- 
selves more  with  the  technical  precepts  of  husbandry  than 
with  the  general  conditions  of  industrial  success  and  social 
well-being.  But  the  two  last  named  have  the  great  merit  of 
having  seen  and  proclaimed  the  superior  value  of  free  to  slave 
labour,  and  Columella  is  convinced  that  to  the  use  of  the 
latter  the  decline  of  the  agricultural  economy  of  the  Romans 
was  in  a  great  measure  to  be  attributed.  These  three  writers 
agree  in  the  belief  that  it  was  chiefly  by  the  revival  and  reform 
of  agriculture  that  the  threatening  inroads  of  moral  corruption 
could  be  stayed,  the  old  Roman  virtues  fostered,  and  the 
foundations  of  the  commonwealth  strengthened.  Their  atti- 
tude is  thus  similar  to  that  of  the  French  physiocrats  invok- 
ing the  improvement  and  zealous  pursuit  of  agriculture  alike 


ANCIENT  TIMES.  21 

against  the  material  evils  and  the  social  degeneracy  of  their 
time.  The  question  of  the  comparative  merits  of  the  large 
and  small  systems  of  cultivation  appears  to  have  been  much 
discussed  in  the  old  Eoman,  as  in  the  modern  European 
world ;  Columella  is  a  decided  advocate  of  the  petite  culture. 
The  jurists  were  led  by  the  coincidence  which  sometimes 
takes  place  between  their  point  of  view  and  that  of  economic 
science  to  make  certain  classifications  and  establish  some  more 
or  less  refined  distinctions  which  the  modern  economists  have 
either  adopted  from  them  or  used  independently.  They  appear 
also  (though  this  has  been  disputed,  Neri  and  Carli  maintain- 
ing the  affirmative,  Pagnini  the  negative)  to  have  had  correct 
notions  of  the  nature  of  money  as  having  a  value  of  its  own, 
determined  by  economic  conditions,  and  incapable  of  being 
impressed  upon  it  by  convention  or  arbitrarily  altered  by 
public  authority.  But  in  general  we  find  in  these  writers,  as 
might  be  expected,  not  so  much  the  results  of  independent 
thought  as  documents  illustrating  the  facts  of  Eoman  economic 
life,  and  the  historical  policy  of  the  nation  with  respect  to 
economic  subjects.  From  the  latter  point  of  view  they  are 
of  much  interest ;  and  by  the  information  they  supply  as  to 
the  course  of  legislation  relating  to  property  generally,  to 
sumptuary  control,  to  the  restrictions  imposed  on  spendthrifts, 
to  slavery,  to  the  encouragement  of  population,  and  the  like, 
they  give  us  much  clearer  insight  than  we  should  otherwise 
possess  into  influences  long  potent  in  the  history  of  Eome  and 
of  the  Western  world  at  large.  But,  as  it  is  with  the  more 
limited  field  of  systematic  thought  on  political  economy  that 
we  are  here  occupied,  we  cannot  enter  into  these  subjects. 
One  matter,  however,  ought  to  be  adverted  to,  because  it  was 
not  only  repeatedly  dealt  with  by  legislation,  but  is  treated 
more  or  less  fully  by  all  Eoman  writers  of  note,  namely,  the 
interest  on  money  loans.  The  rate  was  fixed  by  the  laws  of 
the  Twelve  Tables;  but  lending  on  interest  was  afterwards 
(B.C.  341)  entirely  prohibited  by  the  Genucian  Law.  In  the 
legislation  of  Justinian,  rates  were  sanctioned  varying  from 


22  POLITICAL  ECONOMY. 

four  to  eight  per  cent,  according  to  the  nature  of  the  case,  the 
latter  heing  fixed  as  the  ordinary  mercantile  rate,  whilst  com- 
pound interest  was  forbidden.  The  Eoman  theorists,  almost 
without  exception,  disapprove  of  lending  on  interest  altogether. 
Cato,  as  Cicero  tells  us,  thought  it  as  had  as  murder  ("  Quid 
fenerari  ?  Quid  hominem  occidere  ? "  De  Off.  ii.  25) ;  and 
Cicero,  Seneca,  Pliny,  Columella  all  join  in  condemning  it. 
It  is  not  difficult  to  see  how  in  early  states  of  society  the 
trade  of  money-lending  becomes,  and  not  unjustly,  the  object 
of  popular  odium ;  but  that  these  writers,  at  a  period  when 
commercial  enterprise  had  made  considerable  progress,  should 
continue  to  reprobate  it  argues  very  imperfect  or  confused 
ideas  on  the  nature  and  functions  of  capital.  It  is  probable 
that  practice  took  little  heed  either  of  these  speculative  ideas 
or  of  legislation  on  the  subject,  which  experience  shows  can 
always  be  easily  evaded.  The  traffic  in  money  seems  to  have 
gone  on  all  through  Eoman  history,  and  the  rate  to  have 
fluctuated  according  to  the  condition  of  the  market. 

Looking  back  on  the  history  of  ancient  economic  specula- 
tion, we  see  that,  as  might  be  anticipated  a  priori,  the  results 
attained  in  that  field  by  the  Greek  and  Roman  writers  were 
very  scanty.  As  Diihring  has  well  remarked,  the  questions 
with  which  the  science  has  to  do  were  regarded  by  the  alricient 
thinkers  rather  from  their  political  than  their  properly  eco- 
nomic side.  This  we  have  already  pointed  out  with  respect 
to  their  treatment  of  the  subject  of  population,  and  the  same 
may  be  seen  in  the  case  of  the  doctrine  of  the  division  of 
labour,  with  which  Plato  and  Aristotle  are  in  some  degree 
occupied.  They  regard  that  principle  as  a  basis  of  social 
classification,  or  use  it  in  showing  that  society  is  founded  on 
a  spontaneous  co-operation  of  diverse  activities.  From  the 
strictly  economic  point  of  view,  there  are  three  important 
propositions  which  can  be  enunciated  respecting  that  division : 
— (i)  that  its  extension  within  any  branch  of  production 
makes  the  products  cheaper;  (2)  that  it  is  limited  by  the 
extent  of  the  market ;  and  (3)  that  it  can  be  carried  further 


ANCIENT  TIMES.  23 

in  manufactures  than  in  agriculture.  But  we  shall  look  in 
vain  for  these  propositions  in  the  ancient  writers ;  the  first 
alone  might  be  inferred  from  their  discussions  of  the  subject. 
It  has  been  the  tendency  especially  of  German  scholars  to 
magnify  unduly  the  extent  and  value  of  the  contributions  of 
antiquity  to  economic  knowledge.  The  Greek  and  Roman 
authors  ought  certainly  not  to  be  omitted  in  any  account  of 
the  evolution  of  this  branch  of  study.  But  it  must  be  kept 
steadily  in  view  that  we  find  in  them  only  first  hints  or  rudi- 
ments of  general  economic  truths,  and  that  the  science  is 
essentially  a  modern  one.  We  shall  indeed  see  hereafter  that 
it  could  not  have  attained  its  definitive  constitution  before  oui 
own  time. 


CHAPTER  III. 
THE  MIDDLE  AGES. 

THE  Middle  Ages  (400-1300  A.D.)  form  a  period  of  great 
significance  in  the  economic,  as  in  the  general,  history  of 
Europe.  They  represent  a  vast  transition,  in  which  the  germs 
of  a  new  world  were  deposited,  hut  in  which  little  was  fully 
elaborated.  There  is  scarcely  anything  in  the  later  movement 
of  European  society  which  we  do  not  find  there,  though 
as  yet,  for  the  most  part,  crude  and  undeveloped.  The 
mediaeval  period  was  the  object  of  contemptuous  depreciation 
on  the  part  of  the  liberal  schools  of  the  last  century,  prin- 
cipally because  it  contributed  so  little  to  literature.  But 
there  are  things  more  important  to  mankind  than  literature ; 
and  the  great  men  of  the  Middle  Ages  had  enough  to  do  in 
other  fields  to  occupy  their  utmost  energies.  The  develop- 
ment of  the  Catholic  institutions  and  the  gradual  establishment 
and  maintenance  of  a  settled  order  after  the  dissolution  of  the 
Western  empire  absorbed  the  powers  of  the  thinkers  and 
practical  men  of  several  centuries.  The  first  mediaeval  phase, 
from  the  commencement  of  the  fifth  century  to  the  end  of  the 
seventh,  was  occupied  with  the  painful  and  stormy  struggle 
towards  the  foundation  of  the  new  ecclesiastical  and  civil 
system  ;  three  more  centuries  were  filled  with  the  work  of  its 
consolidation  and  defence  against  the  assaults  of  nomad  popula- 
tions ;  only  in  the  final  phase,  during  the  eleventh,  twelfth,  and 
thirteenth  centuries,  when  the  unity  of  the  West  was  founded 
by  the  collective  action  against  impending  Moslem  invasion,  did 


THE  MIDDLE  AGES.  25 

it  enjoy  a  sufficiently  secure  and  stable  existence  to  exhibit 
its  essential  character  and  produce  its  noblest  personal  types. 
The  elaboration  of  feudalism  was,  indeed,  in  progress  during 
the  whole  period,  showing  itself  in  the  decomposition  of 
power  and  the  hierarchical  subordination  of  its  several  grades, 
the  movement  being  only  temporarily  suspended  in  the  second 
phase  by  the  salutary  dictatorship  of  Charlemagne.  But  not 
before  the  first  century  of  the  last  phase  was  the  feudal  system 
fully  constituted.  In  like  manner,  only  in  the  final  phase 
could  the  effort  of  Catholicism  after  a  universal  discipline  be 
carried  out  on  the  great  scale — an  effort  for  ever  admirable, 
though  necessarily  on  the  whole  unsuccessful. 

No  large  or  varied  economic  activity  was  possible  under  the 
full  ascendency  of  feudalism.     That  organisation,  as  has  been 
abundantly  shown  by  philosophical  historians,  was  indispens- 
able for  the  preservation  of  order  and  for  public  defence,  and 
contributed  important  elements  to  general  civilisation.     But, 
whilst  recognising  it  as  opportune  and  relatively  beneficent, 
we  must  not  expect  from  it  advantages  inconsistent  with  its 
essential  nature  and  historical  office.      The  class  which  pre-  ^ 
dominated  in  it  was  not  sympathetic  with  industry,  and  held   :. 
the  handicrafts  in  contempt,  except  those  subservient  to  war  J 
or  rural  sports.     The  whole  practical  life  of  the  society  was  , 
founded  on  territorial  property ;  the  wealth  of  the  lord  con-  / 
sisted  in  the  produce  of  his  lands  and  the  dues  paid  to  him  in  / 
kind ;  this  wealth  was  spent  in  supporting  a  body  of  retainers 
whose   services  were  repaid   by  their  maintenance.      There 
could  be  little  room  for  manufactures,  and  less  for  commerce  ;  / 
and  agriculture  was  carried  on  with  a  view  to  the  wants  of  j 
the  family,  or  at  most  of  the  immediate  neighbourhood,  not  \ 
to  those  of  a  wider  market.     The  economy  of  the  period  was    I 
therefore  simple,  and,  in  the  absence  of  special  motors  from/ 
without,  unprogressive. 

In  the  latter  portion  of  the  Middle  Ages  several  circum-^ 
stances  came  into  action  which  greatly  modified  these  con-  ( 
ditions.  The  Crusades  undoubtedly  produced  a  powerful  > 


26  POLITICAL  ECONOMY. 

/   economic  effect  by  transferring  in  many  cases  the  possessions 

of  the  feudal   chiefs   to   the   industrious  classes,  whilst  by 
*i 
K  bringing  different  nations  and  races  into  contact,  by  enlarging 

3  the  horizon  and  widening  the  conceptions  of  the  populations, 
•'as  well  as  by  affording  a  special  stimulus  to  navigation,  they 
tended  to  give  a  new  activity  to  international  trade.  The 
independence  of  the  towns  and  the  rising  importance  of  the 
burgher  class  supplied  a  counterpoise  to  the  power  of  the  land 
aristocracy;  and  the  strength  of  these  new  social  elements 
was  increased  by  the  corporate  constitution  given  to  the 
urban  industries,  the  police  of  the  towns  being  also  founded 
on  the  trade  guilds,  as  that  of  the  country  districts  was  on  the 
feudal  relations.  The  increasing  demand  of  the  towns  for  the 
products  of  agriculture  gave  to  the  prosecution  of  that  art  a 
more  extended  and  speculative  character ;  and  this  again  led 
to  improved  methods  of  transport  and  communication.  But 
the  range  of  commercial  enterprise  continued  everywhere 
narrow,  except  in  some  favoured  centres,  such  as  the  Italian 
republics,  in  which,  however,  the  growth  of  the  normal  habits 
of  industrial  life  was  impeded  or  perverted  by  military  ambi- 
tion, which  was  not,  in  the  case  of  those  communities,  checked 
as  it  was  elsewhere  by  the  pressure  of  an  aristocratic  class. 

Every  great  change  of  opinion  on  the  destinies  of  man 
and  the  guiding  principles  of  conduct  must  react  on  the 
sphere  of  material  interests ;  and  the  Catholic  religion  had__a 
powerful  influence  on  the  economic  life  of  the  Middle  Ages. 
Christianity  Inculcates,  perhaps,  no  more  effectively  than  the 
older  religions  the  special  economic  virtues  of  industry,  thrift, 
fidelity  to  engagements,  obedience  to  rightful  authority  ;  but 
it  brought  out  more  forcibly  and  presented  more  persistently 
the  higher  aims  of  life,  and  so  produced  a  more  elevated  way 
of  viewing  the  different  social  relations.  It  purified  domestic 
life,  a  reform  which  has  the  most  important  economic  results. 
It  taught  the  doctrine  of  fundamental  human  equality, 
heightened  the  dignity  of  labour,  and  preached  with  quite 
a  new  emphasis  the  obligations  of  love,  compassion,  and 


THE  MIDDLE  AGES.  27 

forgiveness,  and  the  claims  of  the  poor.  The  constant  pre- 
sentation to  the  general  mind  and  conscience  of  these  ideas, 
the  dogmatic  bases  of  which  were  scarcely  as  yet  assailed  by 
scepticism,  must  have  had  a  powerful  effect  in  moralising  life. 
But  to  the  influence  of  Christianity  as  a  moral  doctrine  was 
added  that  of  the  Church  as  an  organisation,  charged  with 
the  application  of  the  doctrine  to  men's  daily  transactions. 
Besides  the  teachings  of  the  sacred  books,  there  was  a  mass 
of  ecclesiastical  legislation  providing  specific  prescriptions  for 
the  conduct  of  the  faithful.  And  this  legislation  dealt  with 
the  economic  as  with  other  provinces  of  social  activity.  In 
the  Corpus  Juris  Ganonici,  which  condenses  the  result  of 
centuries  of  study  and  effort,  along  with  much  else  is  set  out 
what  wejnay  call  the  Catholic  economic  theory,  if  we  under- 
stand by  theory,  not  a  reasoned  explanation  of  phenomena, 
but  a  body  of  ideas  leading  to  prescriptions  for  the  guidance 
of  conduct.  Life  is  here  looked  at  from  the  point  of  view 
of  spiritual  well-being ;  the  aim  is  to  establish  and  maintain 
amongst  men  a  true  kingdom  of  God. 

The  canonists  are  friendly  to  the  notion  of  a  community 
of  goods  from  the  side  of  sentiment  ("  Dulcissima  rerum 
possessio  communis  est "),  though  they  regard  the  distinction 
of  meum  and  tuum  as  an  institution  necessitated  by  the  fallen 
state  of  man.  In  cases  of  need  the  public  authority  is  justified 
in  re-establishing  pro  hac  vice  the  primitive  community.  The 
care  of  the  poor  is  not  a  matter  of  free  choice ;  the  relief 
of  their  necessities  is  debitum  legate.  Avaritia  is  idolatry  ; 
cupiditas,  even  when  it  does  not  grasp  at  what  is  another's, 
is  the  root  of  all  evil,  and  ought  to  be  not  merely  regulated 
but  eradicated.  Agriculture  and  handiwork  are  viewed  as 
legitimate  modes  of  earning  food  and  clothing ;  but  trade  is 
regarded  with  disfavour,  because  it  was  held  almost  certainly 
to  lead  to  fraud  :  of  agriculture  it  was  said,  "  Deo  non  dis- 
plicet ; "  but  of  the  merchant,  "  Deo  placere  non  potest."  The 
seller  was  bound  to  fix  the  price  of  his  wares,  not  according 
to  the  market  rate,  as  determined  by  supply  and  demand, 


28  POLITICAL  ECONOMY. 

but  according  to  their  real  value  (justum  pretium).  He  must 
not  conceal  the  faults  of  his  merchandise,  nor  take  advan- 
tage of  the  need  or  ignorance  of  the  buyer  to  obtain  from 
him  more  than  the  fair  price.  Interest  on  monev_jig_Jor- 
bidden  ;  the  prohibition  of  usury  is,  indeed,  as  Roscher  says, 
the  centre  of  the  whole  canonistic  system  of  economy,  as 
well  as  the  foundation  of  a  great  part  of  the  ecclesiastical 
jurisdiction.  The  question  whether  a  transaction  was  or  was 
not  usurious  turning  mainly  on  the  intentions  of  the  parties, 
the  innocence  or  blameworthiness  of  dealings  in  which  money 
was  lent  became  rightfully  a  subject  of  determination  for  the 
Church,  either  by  her  casuists  or  in  her  courts.1 

The  foregoing  principles  point  towards  a  noble  ideal,  but  by 
their  ascetic  exaggeration  they  worked  in  some  directions  as 
an  impediment  to  industrial  progress.  Thus,  whilst,  with  the 
increase  of  production,  a  greater  division  of  labour  and  a  larger 
employment  of  borrowed  capital  naturally  followed,  the  laws 
on  usury  tended  to  hinder  this  expansion.  Hence  they  were 
undermined  by  various  exceptions,  or  evaded  by  fictitious 

1  transactions.     These  laws  were  in  fact  dictated  by,  and  adapted 

to,   early  conditions — to  a  state  of  society  in  which  money 

\loans  were  commonly  sought  either  with  a  view  to  wasteful 

•pleasures  or  for  the  relief  of  such  urgent  distress  as  ought 

jrather  to  have  been  the  object  of  Christian  beneficence.     But 

they  were  quite  unsuited  to  a  period  in  which  capital  was 

y  borrowed  for  the  extension  of  enterprise  and  the  employment 

>.  of  labour.  The  absolute  theological  spirit  in  this,  as  in  other 
instances,  could  not  admit  the  modification  in  rules  of  conduct 
demanded  by  a  new  social  situation;  and  vulgar  good  sense 
better  understood  what  were  the  fundamental  conditions  of 

\  industrial  life. 

When  the  intellectual  activity  previously  repressed  by  the 
more  urgent  claims  of  social  preoccupations  tended  to  revive 
towards  the  close  of  the  mediaeval  period,  the  want  of  • 

1  Roscher,  Geachichte  der  N.O.  in  Deutsehland,  pp.  5,  sqq. 


THE  MIDDLE  AGES.  yg 

rational  appreciation  of  the  whole  of  human  affairs  was  felt, 
and  was  temporarily  met  by  the  adoption  of  the  results  of  the 
best  Greek  speculation.  Hence  we  find  in  the  writings  of  St. 
Thomas  Aquinas  the  political  and  economic  doctrines  of 
Aristotle  reproduced  with  a  partial  infusion  of  Christian 
elements.  His  adherence  to  his  master's  point  of  view  is 
strikingly  shown  by  the  fact  that  he  accepts  (at  least  if  he  is 
the  author  of  the  De  Regimine  Principum) l  the  Aristotelian 
theory  of  slavery,  though  by  the  action  of  the  forces  of  his 
own  time  the  last  relics  of  that  institution  were  being  elimi- 
nated from  European  society. 

This  great  change — the  enfranchisement  of  the  working 
classes — was  the  most  important  practical  outcome  of  the 
Middle  Ages.  The  first  step  in  this  movement  was  the  trans- 
formation of  slavery,  properly  so  called,  into  serfdom.  The 
latter  was,  by  its  nature,  a  transitory  condition.  The  serf  was 
bound  to  the  soil,  had  fixed  domestic  relations,  and  partici- 
pated in  the  religious  life  of  the  society ;  and  the  tendency  of 
all  his  circumstances,  as  well  as  of  the  opinions  and  sentiments 
of  the  time,  was  in  the  direction  of  liberation.  This  issue 
was,  indeed,  not  so  speedily  reached  by  the  rural  as  by  the 
urban  workman.  Already  in  the  second  phase  serfdom  is  \ 
abolished  in  the  cities  and  towns,  whilst  agricultural  serfdom  \ 
does  not  anywhere  disappear  before  the  third.  The  latter 
revolution  is  attributed  by  Adam  Smith  to  the  operation  of 
selfish  interests,  that  of  the  proprietor  on  the  one  hand,  who 
discovered  the  superior  productiveness  of  cultivation  by  free 
tenants,  and  that  of  the  sovereign  on  the  other,  who,  jealous 
of  the  great  lords,  encouraged  the  encroachments  of  the 
villeins  on  their  authority.  But  that  the  Church  deserves  a 
chare  of  the  merit  seems  beyond  doubt — moral  impulses,  as 
often  happens,  conspiring  with  political  and  economic  motives. 
The  serfs  were  treated  best  on  the  ecclesiastical  estates,  and 
the  members  of  the  priesthood,  both  by  their  doctrine  and  by 

1  On  this  question  see  Jourdain,  "  Philosophic  de  8.  Thomas,"  voL  I, 
pp.  141-9,  and  400. 


30  POLITICAL  ECONOMY. 

their  situation  since  the  Northern  conquests,  were  constituted 
patrons  and  guardians  of  the  oppressed  or  subject  classes. 

Out  of  the  liberation  of  the  serfs  rose  the  first  lineaments 
of  the  hierarchical  constitution  of  modern  industry  in  the 
separation  between  the  entrepreneurs  and  the  workers.  The 
personal  enfranchisement  of  the  latter,  stimulating  activity 
and  developing  initiative,  led  to  accumulations,  which  were 
further  promoted  by  the  establishment .  of  order  and  good 
government  by  the  civic  corporations  which  grew  out  of  the 
enfranchisement.  Thus  an  active  capitalist  class  came  into 
existence.  It  appeared  first  in  commerce,  the  inhabitants  of 
the  trading  cities  importing  expensive  luxuries  from  foreign 
countries,  or  the  improved  manufactures  of  richer  communities, 
for  which  the  great  proprietors  gladly  exchanged  the  raw  pro- 
duce of  their  lands.  In  performing  the  office  of  carriers,  too, 
between  different  countries,  these  cities  had  an  increasing  field 
for  commercial  enterprise.  At  a  later  period,  as  Adam  Smith 
has  shown,  commerce  promoted  the  growth  of  manufactures, 
which  were  either  produced  for  foreign  sale,  or  made  from 
foreign  materials,  or  imitated  from  the  work  of  foreign  artificers. 
But  the  first  important  development  of  handicrafts  in  modern 
Europe  belongs  to  the  fourteenth  and  fifteenth  centuries,  and 
the  rise  of  manufacturing  entrepreneurs  is  not  conspicuous 
within  the  Middle  Ages  properly  so  called.  Agriculture,  of 
course,  lags  behind ;  though  the  feudal  lords  tend  to  transform 
themselves  into  directors  of  agricultural  enterprise,  their  habits 
and  prejudices  retard  such  a  movement,  and  the  advance  of 
rural  industry  proceeds  slowly.  It  does,  however,  proceed, 
partly  by  the  stimulation  arising  from  the  desire  to  procure  the 
finer  objects  of  manufacture  imported  from  abroad  or  produced 
by  increased  skill  at  home,  partly  by  the  expenditure  on  the 
land  of  capital  amassed  in  the  prosecution  of  urban  industries. 

Some  of  the  trade  corporations  in  the  cities  appear  to  have 
been  of  great  antiquity ;  but  it  was  in  the  thirteenth  century 
that  they  rose  to  importance  by  being  legally  recognised  and 
regulated.  These  corporations  have  been  much  too  absolutely 


THE  MIDDLE  AGES.  31 

condemned  by  most  of  the  economists,  who  insist  on  applying 
to  the  Middle  Ages  the  ideas  of  the  eighteenth  and  nineteenth 
centuries.  They  were,  it  is  true,  unfitted  for  modern  times, 
and  it  was  necessary  that  they  should  disappear ;  their  exist- 
ence indeed  was  quite  unduly  prolonged.  But  they  were  at 
first  in  several  respects  highly  beneficial.  They  were  a  valu- 
able rallying-point  for  the  new  industrial  forces,  which  were 
strengthened  by  the  rise  of  the  esprit  de  corps  which  they 
fostered.  They  improved  technical  skill  by  the  precautions 
which  were  taken  for  the  solidity  and  finished  execution  of 
the  wares  produced  in  each  locality,  and  it  was  with  a  view 
to  the  advancement  of  the  industrial  arts  that  St.  Louis 
undertook  the  better  organisation  of  the  trades  of  Paris. 
The  corporations  also  encouraged  good  moral  habits  through 
the  sort  of  spontaneous  surveillance  which  they  exercised, 
and  they  tended  to  develop  the  social  sentimert  within  the 
limits  of  each  profession,  in  times  when  a  larger  public  spirit 
could  scarcely  yet  be  looked  for. 


CHAPTEK  IV. 
MODERN  TIMES-  FIRST  AND  SECOND  PHASES. 

THB  close  of  the  Middle  Ages,  as  Comte  has  shown,  must  be 
placed  at  the  end,  not  of  the  fifteenth  but  of  the  thirteenth 
century.  The  modern  period,  which  then  began,  is  filled  by 
a  development  exhibiting  three  successive  phases,  and  issuing 
in  the  state  of  things  which  characterises  our  own  epoch. 

I.  During    the    fourteenth    and    fifteenth    centuries    the 
Catholico-feudal  system  was   breaking  down  by  the  mutual 
conflicts  of  its  own  official   members,  whilst  the  constituent 
elements  of   a  new  order  were  rising  beneath  it.      On  the 
practical  side  the  antagonists  matched  against  each  other  were 
the  crown  and  the  feudal  chiefs  ;  and  these  rival  powers  sought 
to  strengthen  themselves  by  forming  alliances  with  the  towns 
and  the  industrial  forces  they  represented.     The  movements 
of  this  phase  can  scarcely  be  said  to  find  an  echo  in  any 
contemporary  economic  literature. 

II.  In  the  second  phase  of  the  modern  period,  which  opens 
with  the  beginning  of  the  sixteenth  century,   the  spontaneous 
collapse  of  the  mediaeval  structure  is  followed  by  a  series  of 
systematic  assaults  which  still  further  disorganise  it.     During 
this  phase  the  central  temporal  power,  which  has  made  a  great 
advance  in  stability  and  resources,  lays  hold  of  the  rising 
elements  of   manufactures  and  commerce,   and  seeks,   whilst 
satisfying  the  popular  enthusiasm  for  their  promotion,  to  use 
them  for  political  ends,   and  make  them  subserve  its  own 
strength  and  splendour  by  furnishing  the  treasure  necessary 


MODERN  TIMES.  33 

for  military  success.  With  this  practical  effort,  and  the  social 
tendencies  on  which  it  rests,  the  Mercantile  school  of  political 
economy,  which  then  obtains  a  spontaneous  ascendency,  is  in 
closeTelation.  Whilst  partially  succeeding  in  the  policy  we 
have  indicated,  the  European  Governments  yet  on  the  whole 
necessarily  fail,  their  origin  and  nature  disqualifying  them  for 
the  task  of  guiding  the  industrial  movement ;  and  the  dis- 
credit of  the  spiritual  power,  with  which  most  of  them  are 
confederate,  further  weakens  and  undermines  them. 

III.  In  the  last  phase,  which  coincides  approximately  with  the 
eighteenth  century,  the  tendency  to  a  completely  new  system, 
both  temporal  and  spiritual,  becomes  decisively  pronounced, 
first  in  the  philosophy  and  general  literature  of  the  period, 
and  then  in  the  great  French  explosion.  The  universal 
critical  doctrine,  which  had  been  announced  by  the  Protes- 
tantism of  the  previous  phase,  and  systematised  in  England 
towards  the  close  of  that  phase,  is  propagated  and  popularised, 
especially  by  French  writers.  The  spirit  of  individualism 
inherent  in  the  doctrine  was  eminently  adapted  to  the  wants 
of  the  time,  and  the  general  favour  with  which  the  dogmas  of 
the  social  contract  and  laisser  faire  were  received  indicated  a 
just  sentiment  of  the  conditions  proper  to  the  contemporary 
situation  of  European  societies.  So  long  as  a  new  coherent 
system  of  thought  and  life  could  not  be  introduced,  what  was 
to  be  desired  was  a  large  and  active  development  of  personal 
energy  under  no  further  control  of  the  old  social  powers  than 
would  suffice  to  prevent  anarchy.  Governments  were  there- 
fore rightly  called  on  to  abandon  any  effective  direction  of  the 
social  movement,  and,  as  far  as  possible,  to  restrict  their 
intervention  to  the  maintenance  of  material  order.  This 
policy  was,  from  its  nature,  of  temporary  application  only  ; 
but  the  negative  school,  according  to  its  ordinary  spirit, 
erected  what  was  merely  a  transitory  and  exceptional  necessity 
into  a  permanent  and  normal  law.  The  unanimous  European 
movement  towards  the  liberation  of  effort,  which  sometimes 
rose  to  the  height  of  a  public  passion,  had  various  sides, 

o 


34  POLITICAL  ECONOMY. 

corresponding  to  the  different  aspects  of  thought  and  life  j 
and  of  the  economic  side  the  French  physiocrats  were  the  first 
theoretic,  representatives  on  the  large  scale,  though  the  office 
they  undertook  was,  both  in  its  destructive  and  organic  pro- 
vinces, more  thoroughly  and  effectively  done  by  Adam  Smith, 
who  ought  to  be  regarded  as  continuing  and  completing  then 
work. 

It  must  be  admitted  that  with  the  whole  modern  move- 
ment serious  moral  evils  were  almost  necessarily  connected. 
The  general  discipline  which  the  Middle  Ages  had  sought  to 
institute  and  had  partially  succeeded  in  establishing,  though 
on  precarious  bases,  having  broken  down,  the  sentiment  of 
duty  was  weakened  along  with  the  spirit  of  ensemble  which 
is  its  natural  ally,  and  individualism  in  doctrine  tended  to 
encourage  egoism  in  action.  In  the  economic  field  this  result 
is  specially  conspicuous.  National  selfishness  and  private 
cupidity  increasingly  dominate ;  and  the  higher  and  lower 
industrial  classes  tend  to  separation  and  even  to  mutual 
hostility.  The  new  elements — science  and  industry — which 
were  gradually  acquiring  ascendency  bore  indeed  in  their 
bosom  an  ultimate  discipline  more  efficacious  and  stable  than 
that  which  had  been  dissolved ;  but  the  final  synthesis  was 
long  too  remote,  and  too  indeterminate  in  its  nature,  to  be 
seen  through  the  dispersive  and  seemingly  incoherent  growth 
of  those  elements.  Now,  however,  that  synthesis  is  becoming 
appreciable ;  and  it  is  the  effort  towards  it,  and  towards  the 
practical  system  to  be  founded  on  it,  that  gives  its  peculiar 
character  to  the  period  in  which  we  live.  And  to  this  spon- 
taneous nisus  of  society  corresponds,  as  we  shall  see,  a  new 
form  of  economic  doctrine,  in  which  it  tends  to  be  absorbed 
into  general  sociology  and  subordinated  to  morals. 

It  will  be  the  object  of  the  following  pages  to  verify  and 
illustrate  in  detail  the  scheme  here  broadly  indicated,  and  to 
point  out  the  manner  in  which  the  respective  features  of  the 
several  successive  modern  phases  find  their  counterpart  and  re- 
flection in  the  historical  development  of  economic  speculation. 


MODERN  TIMES:  FIRST  PHASE.  35 

FIRST  MODERN  PHASE. 

The  first  phase  was  marked,  on  the  one  hand,  by  the 
spontaneous  decomposition  of  the  mediaeval  system,  and, 
on  the  other,  by  the  rise  of  several  important  elements  of 
the  new  order.  The  spiritual  power  became  less  apt  as  well 
as  less  able  to  fulfil  its  moral  office,  and  the  social  movement 
was  more  and  more  left  to  the  irregular  impulses  of  individual 
energy,  often  enlisted  in  the  service  of  ambition  and  cupidity. 
Strong  governments  were  formed,  which  served  to  maintain 
material  order  amidst  the  growing  intellectual  and  moral 
disorder.  The  universal  admission  of  the  commons  as  an 
element  in  the  political  system  showed  the  growing  strength 
of  the  industrial  forces,  as  did  also  in  another  way  the  insur- 
rections of  the  working  classes.  The  decisive  prevalence  of 
peaceful  activity  was  indicated  by  the  rise  of  the  institution 
of  paid  armies — at  first  temporary,  afterwards  permanent — 
which  prevented  the  interruption  or  distraction  of  labour  by 
devoting  a  determinate  minority  of  the  population  to  martial 
operations  and  exercises.  Manufactures  became  increasingly 
important;  and  in  this  branch  of  industry  the  distinction 
between  the  entrepreneur  and  the  workers  was  first  firmly 
established,  whilst  fixed  relations  between  these  were  made 
possible  by  the  restriction  of  military  training  and  service 
to  a  special  profession.  Navigation  was  facilitated  by  the 
use  of  the  mariner's  compass.  The  art  of  printing  showed 
how  the  intellectual  movement  and  the  industrial  develop- 
ment were  destined  to  be  brought  into  relation  with  each 
other  and  to  work  towards  common  ends.  Public  credit  rose 
in  Florence,  Venice,  and  Genoa  long  before  Holland  and 
England  attained  any  great  financial  importance.  Just  at 
the  close  of  the  phase,  the  discovery  of  America  and  of  the 
new  route  to  the  East,  whilst  revolutionising  the  course  of 
trade,  prepared  the  way  for  the  establishment  of  colonies, 
which  contributed  powerfully  to  the  growing  preponderance 
of  industrial  life,  and  pointed  to  its  ultimate  universality. 


36  POLITICAL  ECONOMY. 

It  is  doubtless  due  to  the  equivocal  nature  of  this  stage, 
standing  between  the  mediaeval  and  the  fully  characterised 
modern  period,  that  on  the  theoretic  side  we  find  nothing 
corresponding  to  such  marvellous  practical  ferment  and  expan- 
sion. The  general  political  doctrine  of  Aquinas  was  retained, 
with  merely  subordinate  modifications.  The  only  special 
economic  question  which  seems  to  have  received  particular 
attention  was  that  of  the  nature  and  functions  of  money, 
the  importance  of  which  began  to  be  felt  as  payments  in 
service  or  in  kind  were  discontinued,  and  regular  systems  of 
taxation  began  to  be  introduced. 

Reseller,1  and  after  him  Wolowski,  have  called  attention 
to  Nicole  Oresme,  who  was  teacher  of  Charles  V.,  King  of 
France,  and  died  Bishop  of  Lisieux  in  1382.  Roscher  pro- 
nounces him  a  great  economist.2  His  Tractatus  de  Origine, 
Natura,  Jure,  et  Mutationibus  Monetarum  (reprinted  by 
Wolowski,  1864)  contains  a  theory  of  money  which  is  almost 
entirely  correct  according  to  the  views  of  the  nineteenth  century, 
and  is  stated  with  such  brevity,  clearness,  and  simplicity  of 
language  as  show  the  work  to  be  from  the  hand  of  a  master. 

SECOND  MODERN  PHASE:  MERCANTILE  SYSTEM. 

Throughout  the  first  modern  phase  the  rise  of  the  new 
social  forces  had  been  essentially  spontaneous ;  in  the  second 
"they  became  the  object  of  systematic  encouragement  on  the 
part  of  Governments,  which,  now  that  the  financial  methods 
of  the  Middle  Ages  no  longer  sufficed,  could  not  further  their 
military  and  political  ends  by  any  other  means  than  increased 
taxation,  implying  augmented  wealth  of  the  community. 
Industry  thus  became  a  permanent  interest  of  European 
Governments,  and  even  tended  to  become  the  principal  object 
of  their  policy.  In  natural  harmony  with  this  state  of  facts, 

1  Comptes  rtndut  de  V  Academic  des  Sciencei  morales  et  politiquei,  but 

435.  «qq- 

2  Oeschickte  dtr  N.O.  in  Deutschland,  p.  25. 


SECOND  MODERN  PHASE.  37 

the  mercantile  system  arose  and  grew,  attaining  its  highest 
development  about  the  middle  of  the  seventeenth  century. 

The  Mercantile  doctrine,  stated  in  its  most  extreme  form, 
makes  wealth  and  money  identical,  and  regards  it  therefore  as 
the  great  object  of  a  community  so  to  conduct  its  dealings 
with  other  nations  as  to  attract  to  itself  the  largest  possible 
share  of  the  precious  metals.  Each  country  must  seek  to 
export  the  utmost  possible  quantity  of  its  own  manufactures, 
and  to  import  as  little  as  possible  of  those  of  other  countries, 
receiving  the  difference  of  the  two  values  in  gold  and  silver. 
This  difference  is  called  the  balance  of  trade,  and  the  balance 
is  favourable  when  more  money  is  received  than  is  paid. 
Governments  must  resort  to  all  available  expedients — prohibi- 
tion of,  or  high  duties  on,  the  importation  of  foreign  wares, 
bounties  on  the  export  of  home  manufactures,  restrictions  on 
the  export  of  the  precious  metals — for  the  purpose  of  securing 
such  a  balance. 

But  this  statement  of  the  doctrine,  though  current  in  the 
text-books,  does  not  represent  correctly  the  views  of  all  who 
must  be  classed  as  belonging  to  the  Mercantile  school.  Many 
of  the  members  of  that  school  were  much  too  clear-sighted  to 
entertain  the  belief,  which  the  modern  student  feels  difficulty 
in  supposing  any  class  of  thinkers  to  have  professed,  that 
wealth  consists  exclusively  of  gold  and  silver.  The  mercan- 
tilists may  be  best  described,  as  Roscher1  has  remarked,  not 
by  any  deh'nite  economic  theorem  which  they  held  in  common, 
but  by  a  set  of  theoretic  tendencies,  commonly  found  in  com- 
bination, though  severally  prevailing  in  different  degrees  in 
different  minds.  These  tendencies  may  be  enumerated  as 
follows : — (i)  Towards  over-estimating  the  importance  of 
possessing  a  large  amount  of  the  precious  metals ;  (2)  towards 
an  undue  exaltation  (a)  of  foreign  trade  over  domestic,  and  (&) 
of  the  industry  which  works  up  materials  over  that  which 
provides  them ;  (3)  towards  attaching  too  high  a  value  to  a 
dense  population  as  an  element  of  national  strength ;  and  (4) 
1  Geschichte  der  N.O.  in  Deutschland,  p.  228,  sqq. 


38  POLITICAL  ECONOMY. 

towards  invoking  the  action  of  the  state  in  furthering  arti« 
ncially  the  attainment  of  the  several  ends  thus  proposed  aa 
desirable. 

If  we  consider  the  contemporary  position  of  affairs  in  Western 
Europe,  we  shall  have  no  difficulty  in  understanding  how  these 
tendencies  would  inevitably  arise.  The  discoveries  in  the 
New  World  had  led  to  a  large  development  of  the  European 
currencies.  The  old  feudal  economy,  founded  principally  on 
dealings  in  kind,  had  given  way  before  the  new  "money 
economy,"  and  the  dimensions  of  the  latter  were  everywhere 
expanding.  Circulation  was  becoming  more  rapid,  distant 
communications  more  frequent,  city  life  and  movable  property 
more  important.  The  mercantilists  were  impressed  by  the 
fact  that  money  is  wealth  sui  generis,  that  it  is  at  all  times  in 
universal  demand,  and  that  it  puts  into  the  hands  of  its  pos- 
sessor the  power  of  acquiring  all  other  commodities.  The 
period,  again,  was  marked  by  the  formation  of  great  states,  with 
powerful  Governments  at  their  head.  These  Governments 
required  men  and  money  for  the  maintenance  of  permanent 
armies,  which,  especially  for  the  religious  and  Italian  wars, 
were  kept  up  on  a  great  scale.  Court  expenses,  too,  were 
more  lavish  than  ever  before,  and  a  larger  number  of  civil 
officials  was  employed.  The  royal  domains  and  dues  were 
insufficient  to  meet  these  requirements,  and  taxation  grew  with 
the  demands  of  the  monarchies.  Statesmen  saw  that  for  their 
own  political  ends  industry  must  flourish.  But  manufactures 
make  possible  a  denser  population  and  a  higher  total  value  of 
exports  than  agriculture ;  they  open  a  less  limited  and  more 
promptly  extensible  field  to  enterprise.  Hence  they  became 
the  object  of  special  Governmental  favour  and  patronage, 
whilst  agriculture  fell  comparatively  into  the  background. 
The  growth  of  manufactures  reacted  on  commerce,  to  which  a 
new  and  mighty  arena  had  been  opened  by  the  establishment 
of  colonies.  These  were  viewed  simply  as  estates  to  be  worked 
for  the  advantage  of  the  mother  countries,  and  the  aim  of 
statesmen  was  to  make  the  colonial  trade  a  new  source  of 


SECOND  MODERN  PHASE.  39 

public  revenue.  Each  nation,  as  a  whole,  working  for  its  own 
power,  and  the  greater  ones  for  predominance,  they  entered 
into  a  competitive  struggle  in  the  economic  no  less  than  in  the 
political  field,  success  in  the  former  being  indeed,  by  the  rulers, 
regarded  as  instrumental  to  pre-eminence  in  the  latter.  A 
national  economic  interest  came  to  exist,  of  whi«ih  the  Govern- 
Tneht  made  itself  the  representative  head.  States  became  a 
sovt  of  artificial  hothouses  for  the  rearing  of  urbaw  industries. 
Production  was  subjected  to  systematic  regulation  with  the 
object  of  securing  the  goodness  and  cheapness  of  the  exported 
articles,  and  so  maintaining  the  place  of  the  nation  in  foreign 
markets.  The  industrial  control  was  exercised,  in  part  directly 
by  the  state,  but  largely  also  through  privileged  corporations 
and  trading  companies.  High  duties  on  imports  were  resorted 
to,  at  first  perhaps  mainly~fbr  revenue,  but  afterwards  in  the 
interest  of  national  production.  Commercial  treaties  were  a 
principal  object  of  diplomacy,  the  end  in  view  being  to  exclude 
the  competition  of  other  nations  in  foreign  markets,  whilst  in 
the  home  market  as  little  room  as  possible  was  given  for  the 
introduction  of  anything  but  raw  materials  from  abroad.  The 
colonies  were  prohibited  from  trading  with  other  European 
nations  than  the  parent  country,  to  which  they  supplied  either 
the  precious  metals  or  raw  produce  purchased  with  home 
manufactures.  It  is  evident  that  what  is  known  as  the  mer- 
cantile doctrine  was  essentially  the  theoretic  counterpart  of  the 
practical  activities  of  the  time,  and  that  nations  and  Govern- 
ments were  led  to  it,  not  by  any  form  of  scientific  thought, 
but  by  the  force  of  outward  circumstance,  and  the  observation 
>>f  facts  which  lay  on  the  surface. 

And  yet,  if  we  regard  the  question  from  the  highest  point 
df  view  of  philosophic  history,  we  must  pronounce  the  uni- 
versal enthusiasm  of  this  second  modern  phase  for  manufac- 
tures and  commerce  to  have  been  essentially  just,  as  leading 
the  nations  into  the  main  avenues  of  general  social  develop- 
ment. If  the  thought  of  the  period,  instead  of  being  impelled 
by  contemporary  circumstances,  could  have  been  guided  by 


40  POLITICAL  ECONOMY. 

sociological  prevision,  it  must  have  entered  with  zeal  upon  the 
same  path  which  it  empirically  selected.  The  organisation  of 
agricultural  industry  could  not  at  that  period  make  any  marked 
progress,  for  the  direction  of  its  operations  was  still  in  the 
hands  of  the  feudal  class,  which  could  not  in  general  really 
learn  the  habits  of  industrial  life,  or  place  itself  in  sufficient 
harmony  with  the  workers  on  its  domains.  The  industry  of 
the  towns  had  to  precede  that  of  the  country,  and  the  latter 
had  to  be  developed  mainly  through  the  indirect  action  of  the 
former.  And  it  is  plain  that  it  was  in  the  life  of  the  manu- 
facturing proletariat,  whose  labours  are  necessarily  the  most 
continuous  and  the  most  social,  that  a  systematic  discipline 
could  at  a  later  period  be  first  applied,  to  be  afterwards  ex- 
tended to  the  rural  populations. 

That  the  efforts  of  Governments  for  the  futherance  of 
manufactures  and  commerce  were  really  effective  towards  that 
end  is  admitted  by  Adam  Smith,  and  cannot  reasonably  be 
doubted,  though  free  trade  doctrinaires  have  often  denied  it. 
Technical  skill  must  have  been  promoted  by  their  encourage- 
ments ;  whilst  new  forms  of  national  production  were  fostered 
by  attracting  workmen  from  other  countries,  and  by  lightening 
the  burden  of  taxation  on  struggling  industries.  Communica- 
tion and  transport  by  land  and  sea  were  more  rapidly  improved 
with  a  view  to  facilitate  traffic ;  and,  not  the  least  important 
effect,  the  social  dignity  of  the  industrial  professions  was 
enhanced  relatively  to  that  of  the  classes  before  exclusively 
dominant. 

It  has  often  been  asked  to  whom  the  foundation  of  the 
mercantile  system,  in  the  region  whether  of  thought  or  of 
practice,  is  to  be  attributed.  But  the  question  admits  of  no 
absolute  answer.  That  mode  of  conceiving  economic  facts 
arises  spontaneously  in  unscientific  minds,  and  ideas  suggested 
by  it  are  to  be  found  in  the  Greek  and  Latin  writers.  The 
policy  which  it  dictates  was,  as  we  have  shown,  inspired  by 
the  situation  of  the  European  nations  at  the  opening  of  the 
modern  period.  Such  a  policy  had  been  already  in  some 


SECOND  MODERN  PHASE.  41 

degree  practised  in  the  fourteenth  and  fifteenth  centuries,  thus 
preceding  any  formal  exposition  or  defence  of  its  speculative 
basis.  At  the  commencement  of  the  sixteenth  century  it  began 
to  exercise  a  widely  extended  influence.  Charles  V.  adopted 
it,  and  his  example  contributed  much  to  its  predominance. 
Henry  VIII.  and  Elizabeth  conformed  their  measures  to  it. 
The  leading  states  soon  entered  on  a  universal  competition,  in 
which  each  power  brought  into  play  all  its  political  and 
financial  resources  for  the  purpose  of  securing  to  itself  manu- 
facturing and  commercial  preponderance.  Through  almost  the 
whole  of  the  seventeenth  century  the  prize,  so  far  as  commerce 
was  concerned,  remained  in  the  possession  of  Holland,  Italy 
having  lost  her  former  ascendency  by  the  opening  of  the  new 
maritime  routes,  and  by  her  political  misfortunes,  and  Spain 
and  Germany  being  depressed  by  protracted  wars  and  internal 
dissensions.  The  admiring  envy  of  Holland  felt  by  English 
politicians  and  economists  appears  in  such  writers  as  Raleigh, 
Mun,  Child,  and  Temple ; l  and  how  strongly  the  same 
spectacle  acted  on  French  policy  is  shown  by  a  well-known 
letter  of  Colbert  to  M.  de  Pomponne,2  ambassador  to  the 
Dutch  States.  Cromwell,  by  the  Navigation  Act,  which 
destroyed  the  carrying  trade  of  Holland  and  founded  the 
English  empire  of  the  sea,  and  Colbert,  by  his  whole  economic 
policy,  domestic  and  international,  were  the  chief  practical 
representatives  of  the  mercantile  system.  From  the  latter 
great  statesman  the  Italian  publicist  Mengotti  gave  to  that 
system  the  name  of  Colbertismo  ;  but  it  would  be  an  error  to 
consider  the  French  minister  as  having  absolutely  accepted 
its  dogmas.  He  regarded  his  measures  as  temporary  only, 
and  spoke  of  protective  duties  as  crutches  by  the  help  of  whict 
manufacturers  might  learn  to  walk  and  then  throw  them  away. 
The  policy  of  exclusions  had  been  previously  pursued  by  Sully, 
partly  with  a  view  to  the  accumulation  of  a  royal  treasure,  but 

1  Roscher,  Geschichte  der  N.O.  in  Deutschland,  p.  227. 
*  Clement,  Histoire  de  la  vie  et  de  V administration  de  Colbert  (1846), 
p.  134- 


4*  POLITICAL  ECONOMY. 

chiefly  from  his  special  enthusiasm  for  agriculture,  and  hia 
dislike  of  the  introduction  of  foreign  luxuries  as  detrimentaV 
to  the  national  character.  Colbert's  tariff  of  1664  not  merely 
simplified  but  considerably  reduced  the  existing  duties  ;  the 
tariff  of  1667  indeed  increased  them,  but  that  was  really  a 
political  measure  directed  against  the  Dutch.  It  seems  certain 
that  France  owed  in  a  large  measure  to  his  policy  the  vast 
development  of  trade  and  manufactures  which  so  much 
impressed  the  imagination  of  contemporary  Europe,  and  of 
which  we  hear  so  much  from  English  writers  of  the  time  of 
Petty.  But  this  policy  had  also  undeniably  its  dark  side. 
Industry  was  forced  by  such  systematic  regulation  to  follow 
invariable  courses,  instead  of  adapting  itself  to  changing 
tastes  and  popular  demand.  NOT  was  it  free  to  simplify  the 
processes  of  production,  or  to  introduce  increased  division  of 
labour  and  improved  appliances.  Spontaneity,  initiation,  and 
invention  were  repressed  or  discouraged,  and  thus  ulterior 
sacrificed  in  a  great  measure  to  immediate  results.  The  more 
enlightened  statesmen,  and  Colbert  in  particular,  endeavoured, 
it  is  true,  to  minimise  these  disadvantages  by  procuring,  often 
at  great  expense,  and  communicating  to  the  trades  through 
inspectors  nominated  by  the  Government,  information  respect- 
ing improved  processes  employed  elsewhere  in  the  several 
arts ;  but  this,  though  in  some  degree  a  real,  was  certainly  on 
the  whole,  and  in  the  long  run,  an  insufficient  compensation. 

We  must  not  expect  from  the  writers  of  this  stage  any 
exposition  of  political  economy  as  a  whole  ;  the  publications 
which  appeared  were  for  the  most  part  evoked  by  special 
exigencies,  and  related  to  particular  questions,  usually  of  a 
practical  kind,  which  arose  out  of  the  great  movements  cf  the 
time.  They  were  in  fact  of  the '  nature  of  counsels  to  the 
Governments  of  states,  pointing  out  how  best  they  might 
develop  the  productive  powers  at  their  disposal  and  increase 
the  resources  of  their  respective  countries.  They  are  con- 
ceived (as  List  claims  for  them)  strictly  in  the  spirit  of 
national  economy,  and  cosmopolitanism  is  essentially  foreign 


SECOND  MODERN  PHASE.  43 

to  them.  On  these  monographs  the  mercantile  theory  some- 
times had  little  influence,  the  problems  discussed  not  involving 
its  tenets.  But  it  must  in  most  cases  be  taken  to  be  the 
scheme  of  fundamental  doctrine  (so  far  as  it  was  ever  entitled 
to  such  a  description)  which  in  the  last  resort  underlies  the 
writer's  conclusions. 

The  rise  of  prices  following  on  the  discovery  of  the  Ameri- 
can mines  was  one  of  the  subjects  which  first  attracted  the 
attention  of  theorists.  This  rise  brought  about  a  great  and 
gradually  increasing  disturbance  of  existing  economic  relations, 
and  so  produced  much  perplexity  and  anxiety,  which  were  all 
the  more  felt  because  the  cause  of  the  change  was  not  under- 
stood. To  this  was  added  the  loss  and  inconvenience  arising 
from  the  debasement  of  the  currency  often  resorted  to  by 
sovereigns  as  well  as  by  republican  states.  Italy  suffered 
most  from  this  latter  abuse,  which  was  multiplied  by  her 
political  divisions.  It  was  this  evil  which  called  forth  the 
work  of  Count  Gasparo  Scaruffi  (Discorso  sopra  le  monete  e 
della  vera proportions  fra  I'oro  e  I'argento,  1582).  In  this  he 
put  forward  the  bold  idea  of  a  universal  money,  everywhere 
identical  in  size,  shape,  composition,  and  designation.  The 
project  was,  of  course,  premature,  and  was  not  adopted  even 
by  ths  Italian  princes  to  whom  the  author  specially  appealed ; 
but  the  reform  is  one  which,  doubtless,  the  future  will  see 
realised.  Gian  Donato  Turbolo,  master  of  the  Neapolitan 
"mint,  in  his  Discorsi  e  Relazioni,  1629,  protested  against  any 
tampering  with  the  currency.  Another  treatise  relating  to 
the  subject  of  money  was  that  of  the  Florentine  Bernardo 
Davanzati,  otherwise  known  as  the  able  translator  of  Tacitus, 
Lezioni  delle  Monete,  1588.  It  is  a  slight  and  somewhat 
superficial  production,  only  remarkable  as  written  with  con- 
ciseness and  elegance  of  style. 

A  French  writer  who  dealt  with  the  question  of  money, 
but  from  a  different  point  of  view,  was  Jean  Bod  in.  In  his 
Reponse  aux  paradoxes  de  M.  Malestroit  touchant  I'enclierisse- 
ment  de  toutea  les  choses  et  des  moniiaies,  1568,  and  in  his 


44  POLITICAL  ECONOMY. 

Discours  sur  le  rehaussement  et  la  diminution  des  monnaiee, 
1578,  he  showed  a  more  rational  appreciation  than  many  cf  hia 
contemporaries  of  the  causes  of  the  revolution  in  prices,  and 
the  relation  of  the  variations  in  money  to  the  market  values 
of  wares  in  general  as  well  as  to  the  wages  of  labour.  He  saw 
that  the  amount  of  money  in  circulation  did  not  constitute 
the  wealth  of  the  community,,  and  that  the  prohibition  of  the 
export  of  the  precious  metals  was  useless,  because  rendered 
inoperative  by  the  necessities  of  trade.  Bodin  is  no  incon- 
siderable figure  in  the  literary  history  of  the  epoch,  and  did 
not  confine  his  attention  to  economic  problems ;  in  his  Six 
livres  de  la  Repullique,  about  1576,  he  studies  the  general 
conditions  of  the  prosperity  and  stability  of  states.  In  har- 
mony with  the  conditions  of  his  age,  he  approves  of  absolute 
Governments  as  the  most  competent  to  ensure  the  security 
and  wellbeing  of  their  subjects.  He  enters  into  an  elaborate 
defence  of  individual  property  against  Plato  and  More,  rather 
perhaps  because  the  scheme  of  his  work  required  the  treatment 
of  that  theme  than  because  it  was  practically  urgent  in  his 
day,  when  the  excesses  of  the  Anabaptists  had  produced  a 
strong  feeling  against  communistic  doctrines.  He  is  under 
the  general  influence  of  the  mercantilist  views,  and  approves 
of  energetic  Governmental  interference  in  industrial  matters, 
of  high  taxes  on  foreign  manufactures  and  low  duties  on  raw 
materials  and  articles  of  food,  and  attaches  great  importance 
to  a  dense  population.  But  he  is  not  a  blind  follower  of  the 
system ;  he  wishes  for  unlimited  freedom  of  trade  in  many 
cases ;  and  he  is  in  advance  of  his  more  eminent  contemporary 
Montaigne l  in  perceiving  that  the  gain  of  one  nation  is  not 
necessarily  the  loss  of  another.  To  the  public  finances,  which 
he  calls  the  sinews  of  the  state,  he  devotes  much  attention, 
and  insists  on  the  duties  of  the  Government  in  respect  to 
the  right  adjustment  of  taxation.  In  general  he  deserves 
the  praise  of  steadily  keeping  in  view  the  higher  aims  and 

1  "  II  ne  se  faict  aucun  profit  qu'au  dommage  d'autruy."     Jb'isais,  li v. 
I,  chap.  21. 


SECOND  MODERN  PHASE.  45 

interests  of  society  in  connection  with  the  regulation  and 
development  of  its  material  life. 

Correct  views  as  to  the  cause  of  the  general  rise  of  prices 
are  also  put  forward  by  the  English  writer,  W.  S.  (William 
Stafford),  in  his  Briefe  Conceipte  of  English  Policy,  published 
in  1581,  and  dedicated  to  Queen  Elizabeth.  It  is  in  the  form 
of  a  dialogue,  and  is  written  with  liveliness  and  spirit.  The 
author  seems  to  have  been  acquainted  with  the  writings  of 
Bodin.  He  has  just  ideas  as  to  the  nature  of  money,  and 
fully  understands  the  evils  arising  from  a  debased  coinage. 
He  describes  in  detail  the  way  in  which  the  several  interests 
in  the  country  had  been  affected  by  such  debasement  in 
previous  reigns,  as  well  as  by  the  change  in  the  value  of  the 
precious  metals.  The  great  popular  grievance  of  his  day,  the 
conversion  of  arable  land  into  pasture,  he  attributes  chiefly  to 
the  restrictions  on  the  export  of  corn,  which  he  desires  to  see 
abolished.  But  in  regard  to  manufactures  he  is  at  the  same 
point  of  view  with  the  later  mercantilists,  and  proposes  the 
exclusion  of  all  foreign  wares  which  might  as  well  be  provided 
at  home,  and  the  prohibition  of  the  export  of  raw  materials 
intended  to  be  worked  up  abroad. 

Out  of  the  question  of  money,  too,  arose  the  first  remarkable 
German  production  on  political  economy  which  had  an  original 
national  character  and  addressed  the  public  in  the  native 
tongue.  Duke  George  of  the  Ernestine  Saxon  line  was  in- 
clined (1530)  to  introduce  a  debasement  of  the  currency.  A 
pamphlet,  Gemeine  Stymmen  von  der  Milntze,  was  published 
in  opposition  to  this  proceeding,  under  the  auspices  of  the 
Albertine  branch,  whose  policy  was  sounder  in  the  economic 
sphere  no  less  than  in  that  of  ecclesiastical  affairs.  A  reply 
appeared  justifying  the  Ernestine  project.  This  was  followed 
by  a  rejoinder  from  the  Albertine  side.  The  Ernestine  pam- 
phlet is  described  by  Roscher  as  ill-written,  obscure,  inflated, 
/  and,  as  might  be  expected  from  the  thesis  it  maintained, 
sophistical.  But  it  is  interesting  as  containing  a  statement  of 
the  fundamental  principles  of  the  mercantile  system  more  than 


46  POLITICAL  ECONOMY. 

one  hundred  years  before  the  publication  of  Mun's  book,  and 
forty-six  before  that  of  Bodin's  Six  livres  de  la  Republique. 
The  Albertine  tracts,  according  to  Koscher,  exhibit  such  sound 
views  of  the  conditions  and  evidences  of  national  wealth,  of 
the  nature  of  money  and  trade,  and  of  the  rights  and  duties 
of  Governments  in  relation  to  economic  action,  that  he  regards 
the  unknown  author  as  entitled  to  a  place  beside  Raleigh  and 
the  other  English  "  colonial-theorists "  of  the  end  of  the  six- 
teenth and  beginning  of  the  seventeenth  century. 

In  connection  with  the  same  subject  of  money  we  meet  the 
great  name  of  Copernicus.  His  treatise  De  monetce  cudendce 
ratione,  1526  (first  printed  in  1816),  was  written  by  order  of 
King  Sigismund  I.,  and  is  an  exposition  of  the  principles  on 
which  it  was  proposed  to  reform  the  currency  of  the  Prussian 
provinces  of  Poland.  It  advocates  unity  of  the  monetary 
system  throughout  the  entire  state,  with  strict  integrity  in  the 
quality  of  the  coin,  and  the  charge  of  a  seigniorage  sufficient 
to  cover  the  exper/ses  of  mintage. 

Antonio  Serra  is  regarded  by  some  as  the  creator  of  modern 
political  economy.  He  was  a  native  of  Cosenza  in  Calabria. 
His  Breve  Trattato  delle  cause  che  possono  fare  abbondare  It 
regni  d'oro  e  d'argento  dove  non  sono  miniere,  1613,  was 
written  during  his  imprisonment,  which  is  believed  to  have 
been  due  to  his  having  taken  part  in  the  conspiracy  of 
Campanella  for  the  liberation  of  Naples  from  the  Spanish 
yoke  and  the  establishment  of  a  republican  government.  This 
work,  long  overlooked,  was  brought  into  notice  in  the  follow- 
ing century  by  Galiani  and  others.  Its  title  alone  would 
sufficiently  indicate  that  the  author  had  adopted  the  principles 
of  the  mercantile  system,  and  in  fact  in  this  treatise  the 
essential  doctrines  of  that  system  are  expounded  in  a  tolerably 
formal  and  consecutive  manner.  He  strongly  insists  on  the 
superiority  of  manufactures  over  agriculture  as  a  source  of 
national  wealth,  and  uses  in  support  of  this  view  the  pros- 
perity of  Genoa,  Florence,  and  Venice,  as  contrasted  with  the 
depressed  condition  of  Naples.  With  larger  insight  than 


SECOND  MODERN  PHASE.  47 

many  of  the  mercantilists  exhibit,  he  points  out  the  import- 
ance,  towards  the  acquisition,  of  wealth,  not  alone  of  favourable 
external  conditions,  but  of  energetic  character  and  industrious 
habits  in  a  population,  as  well  as  of  a  stable  government  and 
a  good  administration  of  the  laws, 

The  first  systematic  treatise  on  our  science  which  proceeded 
from  a  French  author  was  the  Traite  de  VEconomie  Politique, 
published  by  Montchre"tien  de  Watteville  (or  Yasteville)  *  in 
1615.  The  use  of  the  title,  says  Boscher,  now  for  the  first 
time  given  to  the  science,  was  in  itself  an  important  service, 
since  even  Bacon  understood  by  "  Economia  "  only  the  theory 
of  domestic  management.  The  general  tendencies  and  aims 
of  the  period  are  seen  in  the  fact  that  this  treatise,  notwith- 
standing the  comprehensive  name  it  bears,  does  not  deal  with 
agriculture  at  all,  but  only  with  the  mechanical  arts,  navigation, 
commerce,  and  public  finance.  The  author  is  filled  with  the 
then  dominant  enthusiasm  for  foreign  trade  and  colonies. 
He  advocates  the  control  by  princes  of  the  industry  of  their 
subjects,  and  condemns  the  too  great  freedom,  which,  in  his 
opinion  to  their  own  detriment,  the  Governments  of  Spain, 
Portugal,  and  Holland  had  given  to  trade.  His  book  may 
be  regarded  as  a  formal  exposition  of  the  principles  of  the 
mercantile  system  for  the  use  of  Frenchmen. 

A  similar  office  was  performed  in  England  by  Thomas  Mun. 
In  his  two  works,  A  Discourse  of  Trade  from  England  unto 
the  East  Indies,  2nd  ed.,  1621,  and  especially  in  England's 
Treasure  by  Foreign  Trade,  1664  (posthumous),  we  have  for 
the  first  time  a  clear  and  systematic  statement  of  the  theory 
of  the  balance  of  trade,  as  well  as  of  the  means  by  which, 
according  to  the  author's  view,  a  favourable  balance  could  be 
secured  for  England.  The  great  object  of  the  economic  policy 
of  a  state,  according  to  him,  should  be  so  to  manage  its  export 

1  Montehre'tien,  having  fomented  the  rebellion  in  Normandy  in  1621, 
was  slain,  with  a  few  followers,  by  Claude  Turgot,  lord  of  Les  Tourailles, 
who  belonged  to  the  elder  branch  of  the  noble  house  from  which  the 
great  Turgot  was  descended. 


48  POLITICAL  ECONOMY. 

of  manufactures,  its  direct  and  carrying  trade,  and  its  customi 
duties,  as  to  attract  to  itself  money  from  abroad.  Hewaa^ 
however,  opposed  to  the  prohibition  of  the  export  of  the 
precious  metals  in  exchange  for  foreign  wares,  but  on  the 
ground,  fully  according  with  his  general  principles,  that  those 
wares  might  afterwards  be  re-exported  and  might  then  bring 
back  more  treasure  than  had  been  originally  expended  in  their 
purchase ;  the  first  export  of  money  might  be,  as  he  said,  the 
seed-time,  of  which  the  ultimate  receipt  of  a  larger  amount 
would  be  the  harvest.1  He  saw,  too,  that  it  is  inexpedient 
to  have  too  much  money  circulating  in  a  country,  as  this 
enhances  the  prices  of  commodities,  and  so  makes  them  leas 
saleable  to  foreigners,  but  he  is  favourable  to  the  formation 
and  maintenance  of  a  state  treasure.2 

One  of  the  most  remarkable  of  the  moderate  mercantilists 
was  Sir  Josiah  Child  (Brief  Observations  concerning  Trade  and 
the  Interest  of  Money,  1668,  and  A  Neio  Discourse  of  Trade, 
1668  and  1690).  He  was  one  of  those  who  held  up  Holland 
as  a  model  for  the  imitation  of  his  fellow-countrymen.  He 
is  strongly  impressed  with  the  importance  for  national  wealth 
and  wellbeing  of  a  low  rate  of  interest,  which  he  says  is  to 
commerce  and  agriculture  what  the  soul  is  to  the  body,  and 
which  he  held  to  be  the  "  causa  causans  of  all  the  other  causes 
of  the  riches  of  the  Dutch  people."  Instead  of  regarding 
such  low  rate  as  dependent  on  determinate  conditions,  which 
should  be  allowed  to  evolve  themselves  spontaneously,  he 
thinks  it  should  be  created  and  maintained  by  public  authority. 
Child,  whilst  adhering  to  the  doctrine  of  the  balance  of 
trade,  observes  that  a  people  cannot  always  sell  to  foreigners 

1  On  Mun's  doctrines,  see  Smith's  Wealth  of  Nations,  Bk.  iv.  chap.  i. 

1  Writers  of  less  importance  who  followed  the  same  direction  were 
Sir  Thomas  Culpeper  (A  Tract  against  the  High  Kate  of  Usury t  1623, 
and  Useful  Remark  on  High  Interest,  1641),  Sir  Dudley  Digges  (Defence 
of  Trade,  1615),  G.  Malynes  (Consuetude  vel  Lex  Mercutoria,  1622), 
E.  Misselden  (Circle  of  Commerce,  1623),  Samuel  Fortrey  (England'i 
Interest  and  Improvement,  1663  and  1673),  and  John  Pollexfen  (England 
and  India  imontistent  in  their  Manufactures,  1697). 


SECOND  MODERN  PHASE.  49 

without  ever  buying  from  them,  and  denies  that  the  export^ 
of  the  precious  metals  is  necessarily  detrimental.  He  has  the 
ordinary  mercantilist  partiality  for  a  numerous  population. 
He  advocates  the  reservation  hy  the  mother  country  of  the 
sole  right  of  trade  with  her  colonies,  and,  under  certain 
limitations,  the  formation  of  privileged  trading  companies. 
A.s  to  the  Navigation  Act,  he  takes  up  a  position  not  unlike 
that  afterwards  occupied  by  Adam  Smith,  regarding  that 
measure  much  more  favourably  from  the  political  than  from 
the  economic  point  of  view.  It  jvill  be  seen  that  he  is  some- 
what eclectic  in  his  opinions ;  but  he  cannot  properly  be  re- 
garded, though  some  have  attributed  to  him  that  character,  as 
a  precursor  of  the  free-trade  school  of  the  eighteenth  century. 

Two  other  eclectics  may  be  here  mentioned,  in  whom  just 
views  are  mingled  with  mercantilist  prejudices — Sir  William 
Temple  and  Charles  Davenant.  The  former  in  his  Observations 
upon  the  United  Provinces  of  the  Netherlands,  1672,  and  his 
Essay  on  the  Trade  of  Ireland,  1673,  nas  many  excellent 
remarks  on  fundamental  economic  principles,  as  on  the  func- 
tions of  labour  and  of  saving  in  the  production  of  national 
wealth ;  but  he  is  infected  with  the  errors  of  the  theory  of  the 
balance  of  trade.  He  follows  the  lead  of  Raleigh  and  Child 
in  urging  his  fellow-countrymen  to  imitate  the  example  of  the 
Dutch  in  their  economic  policy — advice  which  in  his  case  was 
founded  on  his  observations  during  a  lengthened  residence  in 
Holland  as  ambassador  to  the  States.  Davenant  in  his  Essay 
on  the  East-India  Trade,  1696-97,  Essay  on  the  Probable 
Ways  of  making  the  People  Gainers  in  the  Balance  of  Trade, 
1699,  &c.,  also  takes  up  an  eclectic  position,  combining  some 
correct  views  on  wealth  and  money  with  mercantilist  notions 
on  trade,  and  recommending  Governmental  restrictions  on 
colonial  commerce  as  strongly  as  he  advocates  freedom  of 
exchange  at  home. 

JWhilst  the  mercantile  system  represented  the  prevalent  form 
of  economic  thought  in  the  seventeenth  century,  and  was  alone 
dominant  in  the  region  of  practical  statesmanship,  there  waa 

"   D 


£0  POLITICAL  ECONOMY. 

growing  up,  side  by  side  with  it,  a  body  of  opinion,  different 
aiid  indeed  hostile  in  character,  which  was  destined  ultimately 
to  drive  it  from  the  field.  The  new  ideas  were  first  developed 
in  England,  though  it  was  in  France  that  in  the  following 
century  they  took  hold  of  the  public  mind,  and  became  a 
power  in  politics.  That  they  should  first  show  themselves 
here,  and  afterwards  be  extended,  applied,  and  propagated 
throughout  Europe  by  French  writers,  belongs  to  the  order 
of  things  according  to  which  the  general  negative  doctrine  in 
morals  and  politics,  undoubtedly  of  English  origin,  found  its 
chief  home  in  France,  and  was  thence  diffused  in  widening 
circles  through  the  civilised  world.  In  England  this  move- 
ment of  economic  thought  took  the  shape  mainly  of  individual 
criticism  of  the  prevalent  doctrines,  founded  on  a  truer  analysis 
of  facts  and  conceptions ;  in  France  it  was  penetrated  with  a 
powerful  social  sentiment,  furnished  the  creed  of  a  party,  and 
inspired  a  protest  against  institutions  and  an  urgent  demand 
for  practical  reform. 

Eegarded  from  the  theoretic  side,  the  characteristic  features 
of  the  new  direction  were  the  following.  The  view  of  at  least 
the  extreme  mercantilists  that  national  wealth  depends  on  the 
accumulation  of  the  precious  metals  is  proved  to  be  false,  and 
the  gifts  of  nature  and  the  labour  of  man  are  shown  to  be  its 
real  sources.  The  exaggerated  estimate  of  the  importance  of 
foreign  commerce  is  reduced,  and  attention  is  once  more  turned 
to  agriculture  and  the  conditions  of  its  successful  prosecution. 
On  the  side  of  practical  policy,  a  so-called  favourable  balance 
of  trade  is  seen  not  to  be  the  true  object  of  a  nation's  or  a 
statesman's  efforts,  but  the  procuring  for  the  whole  population 
in  the  fullest  measure  the  enjoyment  of  the  necessaries  and 
conveniences  of  life.  And — what  more  than  anything  else 
contrasts  the  new  system  with  the  old — the  elaborate  appa- 
ratus of  prohibitions,  protective  duties,  bounties,  monopolies, 
and  privileged  corporations,  which  the  European  Governments 
had  created  in  the  supposed  interests  of  manufactures  and 
trade,  is  denounced  or  deprecated  as  more  an  impediment  than 


SECOND  MODERN  PHASE.  51 

•  furtherance,  and  the  freedom  of  industry  is  insisted  on  as 
the  one  thing  needful.  This  circle  of  ideas,  of  course,  emerges 
only  gradually,  and  its  earliest  representatives  in  economic 
literature  in  general  apprehend  it  imperfectly  and  advocate  it 
with  reserve ;  but  it  rises  steadily  in  importance,  being  more 
and  more  favoured  by  the  highest  minds,  and  finding  an  in- 
creasing body  of  supporters  amongst  the  intelligent  public. 

Some  occasional  traits  of  an  economic  scheme  in  harmony 
with  these  new  tendencies  are  to  be  found  in  the  De  Cive 
and  Leviathan  of  Hobbes.  But  the  efficacy  of  that  great 
thinker  lay  rather  in  the  general  philosophic  field ;  and  by  sys- 
tematising,  for  the  first  time,  the  whole  negative  doctrine,  he 
gave  a  powerful  impulse  towards  the  demolition  of  the  exist- 
ing social  order,  which  was  destined,  as  we  shall  see,  to  have 
momentous  consequences  in  the  economic  no  less  than  in  the 
strictly  political  department  of  things. 

A  writer  of  no  such  extended  range,  but  of  much  sagacity 
and  good  sense,  was  Sir  William  Petty,  author  of  a  number 
of  pieces  containing  germs  of  a  sound  economic  doctrine.  A 
leading  thought  in  his  writings  is  that  "labour  is  the  father 
and  active  principle  of  wealth,  lands  are  the  mother."  He 
divides  a  population  into  t\vo  classes,  the  productive  and  the 
unproductive,  according  as  they  are  or  are  not  occupied  in 
producing  .useful  material  things.  The  value  of  any  com- 
modity depends,  he  says,  anticipating  Ricardo,  on  the  amount 
of  labour  necessary  for  its  production.  He  is  desirous  of 
obtaining  a  universal  measure  of  value,  and  chooses  as  his 
unit  the  average  food  of  the  cheapest  kind  required  for  a  man's 
daily  sustenance.  He  understands  the  nature  of  the  rent  of 
land  as  the  excess  of  the  price  of  its  produce  over  the  cost  of 
production.  He  disapproves  of  the  attempt  to  fix  by  autho- 
rity a  maximum  rate  of  interest,  and  is  generally  opposed  to 
Governmental  interference  with  the  course  of  industry.  He 
sees  that  a  country  requires  for  its  exchanges  a  definite 
quantity  of  money  and  may  have  too  much  of  it,  and  con- 
demns  the  prohibition  of  its  exportation.  He  holds  that  one 


52  POLITICAL  ECONOMY. 

only  of  the  precious  metals  must  be  the  foundation  of  the 
currency,  the  other  circulating  as  an  ordinary  article  of  mer- 
chandise. Petty's  name  is  specially  associated  with  the  pro* 
gress  of  statistics,  with  which  he  was  much  occupied,  and 
which  he  called  hy  the  name  of  political  arithmetic.  Relying 
on  the  results  of  such  inquiries,  he  set  himself  strongly  against 
the  opinion  which  was  maintained  by  the  author  of  Britannia 
Languens  (1680),  Fortrey,  Roger  Coke,  and  other  writers,  that 
the  prosperity  of  England  was  on  the  decline. 

The  most  thorough-going  and  emphatic  assertion  of  the  free- 
trade  doctrine  against  the  system  of  prohibitions,  which  had 
gained  strength  by  the  Revolution,  was  contained  in  Sir 
Dudley  North's  Discourses  upon  Trade,  1691.  He  shows 
that  wealth  may  exist  independently  of  gold  or  silver,  its 
source  being  human  industry,  applied  either  to  the  cultivation 
of  the  soil  or  to  manufactures.  The  precious  metals,  however, 
arc  one  element  of  national  wealth,  and  perform  highly  im- 
portant offices.  Money  may  exist  in  excess,  as  well  as  in 
defect,  in  a  country ;  and  the  quantity  of  it  required  for  the 
purposes  of  trade  will  vary  with  circumstances  ;  its  ebb  and 
flow  will  regulate  themselves  spontaneously.  It  is  a  mistake 
to  suppose  that  stagnation  of  trade  arises  from  want  of  money ; 
it  must  arise  either  from  a  glut  of  the  home  market,  or  from 
a  disturbance  of  foreign  commerce,  or  from  diminished  con- 
sumption caused  by  poverty.  The  export  of  money  in  the 
/~  course  of  traffic,  instead  of  diminishing,  increases  the  national 
wealth,  trade  being  only  an  exchange  of  superfluities.  Nation? 
are  economically  related  to  the  world  just  in  the  same  way  as 
cities  to  the  state  or  as  families  to  the  city.  North  emphasises 
more  than  his  predecessors  the  value  of  the  home  trade.  With 
respect  to  the  interest  of  capital,  he  maintains  that  it  depends, 
like  the  price  of  any  commodity,  on  the  proportion  of  demand 
and  supply,  and  that  a  low  rate  is  a  result  of  the  relative 
increase  of  capital,  and  cannot  be  brought  about  by  arbitrary 
regulations,  as  had  been  proposed  by  Child  and  others.  In 
arguing  the  question  of  free  trade,  he  urges  that  individual* 


SECOND  MODERN  PHASE.  53 

often  take  their  private  interest  as  the  measure  of  good  and 
evil,  and  would  for  its  sake  debar  others  from  their  equal  right 
of  buying  and  selling,  but  that  every  advantage  given  to  one 
interest  or  branch  of  trade  over  another  is  injurious  to  the 
public.  No  trade  is  unprofitable  to  the  public;  if  it  were,  it 
would  be  given  up;  when  trades  thrive,  so  does  the  public, 
of  which  they  form  a  part.  Prices  must  determine  themselves, 
and  cannot  be  fixed  by  law ;  and  all  forcible  interference  with 
them  does  harm  instead  of  good.  No  people  can  become  rich 
by  state  regulations, — only  by  peace,  industry,  freedom,  and 
unimpeded  economic  activity.  It  will  be  seen  how  closely 
North's  view  of  things  approaches  to  that  embodied  some 
eighty  years  later  in  Adam  Smith's  great  work.1 

Locke  is  represented  by  Koscher  as,  along  with  Petty  and 
North,  making  up  the  "triumvirate"  of  eminent  British 
economists  of  this  period  who  laid  the  foundations  of  a  new 
and  more  rational  doctrine  than  that  of  the  mercantilists. 
But  this  view  of  his  claims  seems  capable  of  being  accepted 
only  with  considerable  deductions.  His  specially  economic 
writings  are  Considerations  of  the  lowering  of  Interest  and 
raising  the  value  of  Money,  1691,  and  Further  Considerations, 
1695.  Though  Leibnitz  declared  with  respect  to  these  treatises 
that  nothing  more  solid  or  intelligent  could  be  said  on  their 
subject,  it  is  difficult  absolutely  to  adopt  that  verdict.  Locke's 
spirit  of  sober  observation  and  patient  analysis  led  him  indeed 
to  some  just  conclusions ;  and  he  is  entitled  to  the  credit  of 
having  energetically  resisted  the  debasement  of  the  currency, 
which  was  then  recommended  by  some  who  were  held  to  be 
eminent  practical  authorities.  But  he  falls  into  errors  which 
show  that  he  had  not  by  any  means  completely  emancipated 
himself  from  the  ideas  of  the  mercantile  system.  He  attaches 
far  too  much  importance  to  money  as  such.  He  says  expressly 
that  riches  consist  in  a  plenty  of  gold  and  silver,  that  is,  as  he 

1  YetM.  Eugene  Daire  asserts  (CEuvresde  Turgot,  i.  322)  that  "Hume 
et  Tucker  sont  les  deux  premiers  e"crivains  qui  se  soient  Sieve's,  en  Angle, 
terre,  au-dessua  des  theories  da  systemr  mercantile." 


54  POLITICAL  ECONOMY. 

explains,  in  having  more  in  proportion  of  those  metals  than 
the  rest  of  the  world  or  than  our  neighbours.  "  In  a  country 
not  furnished  with  mines,  there  are  but  two  ways  of  growing 
rich,  either  conquest  or  commerce."  Hence  he  accepts  the 
doctrine  of  the  balance  of  trade.  He  shows  that  the  rate  of 
interest  can  no  more  be  fixed  by  law  than  the  rent  of  houses 
or  the  hire  of  ships,  and  opposes  Child's  demand  for  legisla- 
tive interference  with  it.  But  he  erroneously  attributed  the 
fall  of  the  rate  which  had  taken  place  generally  in  Europe  to 
the  increase  of  the  quantity  of  gold  and  silver  by  the  discovery 
of  the  American  mines.  He  sets  too  absolute  a  value  on  a 
numerous  population,  in  this  point  agreeing  with  Petty.  On 
wages  he  observes  that  the  rate  must  be  such  as  to  cover  the 
indispensable  wants  of  the  labourer;  when  the  price  of  sub- 
sistence rise?,  wages  must  rise  in  a  like  ratio,  or  the  working 
population  must  come  on  the  poor  rates.  The  fall  of  the  rent 
of  land  he  regards  as  a  sure  sign  of  the  decline  of  national 
wealth.  "  Taxes,  however  contrived,  and  out  of  whose  hands 
soever  immediately  taken,  do,  in  a  country  where  their  great 
fund  is  in  land,  for  the  most  part  terminate  upon  land."  In 
this  last  proposition  we  see  a  foreshadowing  of  the  impdf 
unique  of  the  physiocrats.  Whatever  may  have  been  Locke's 
direct  economic  services,  his  principal  importance,  like  that  of 
Hobbes,  lies  in  his  general  philosophic  and  political  principles, 
which  powerfully  affected  French  and  indeed  European  thought, 
exciting  a  spirit  of  opposition  to  arbitrary  power,  and  laying  the 
foundation  of  the  doctrine  developed  in  the  Contrat  Social.1 

1  Minor  English  writers  who  followed  the  new  economic  direction 
were  Lewis  Roberts,  Treasure  of  Traffick,  1641 ;  Rice  Vaughan,  DixccurM 
of  Coin  and  Coinage,  1675  ;  Nicholas  Barbon,  Discourse  concerning  (7cin> 
ing  the  new  money  lighter,  1696,  in  which  some  of  Locke's  errors  were 
pointed  out  ;  and  the  author  of  an  anonymous  book  entitled  Consider**- 
tions  on  the  East  India  Trade,  1701.  Practical  questions  much  debated 
at  this  period  were  those  connected  with  banking,  on  which  a  lengthened 
controversy  took  place,  S.  Lamb,  W.  Potter,  F.  Cradocke,  M.  Lewis, 
M.  Godfrey,  R.  Murray,  H.  Chamberlen,  and  W.  Paterson,  founder  of 
the  Bank  of  England  (1694).  producing  many  pamphlets  on  the  subject  { 
and  the  management  of  the  poor,  which  was  treated  by  Locke,  Sil 
Matthew  Hale,  R.  Haines,  T.  Firmin,  and  others. 


CHAPTER  V. 

THIRD  MODERN  PHASE:  SYSTEM  OF  NATURAL 
LIBERTY. 

THE  changes  introduced  during  the  third  phase  in  the  in- 
ternal organisation  of  the  industrial  world  were  (i)  the  more 
complete  separation  of  banking  from  general  commerce,  and 
the  wider  extension  of  its  operations,  especially  through  the 
system  of  public  credit;  and  (2)  the  great  development  of  the 
use  of  machinery  in  production.  The  latter  did  not  become 
very  prominent  during  the  first  half  of  the  eighteenth  century. 
Whilst  tending  to  promote  the  dignity  of  the  working  classes  by 
relieving  them  from  degrading  and  exhausting  physical  labour, 
it  widened  the  gulf  between  them  and  the  capitalist  employers. 
It  thus  became  plain  that  for  the  definitive  constitution  of  in- 
dustry a  moral  reform  was  the  necessary  preliminary  condition. 
With  respect  to  the  political  relations  of  industry,  a  remark- 
able inversion  now  showed  itself.  The  systematic  encourage- 
ments which  the  European  Governments  had  extended  to  it 
in  the  preceding  phase  had  been  prompted  by  their  desire  to 
use  it  as  an  instrument  for  achieving  the  military  superiority 
which  was  the  great  end  of  their  policy.  Now,  on  the  con- 
trary, the  military  spirit  subordinated  itselfto  the  industrial, 
and  the  armies  and  the.  diplomacy  of  governments  were  placed 
at  the  service  of  commerce.  The  wars  which  filled  a  large 
part  of  the  eighteenth  century  were  essentially  Commercial 
wars,  arising  out  of  the  effort  to  sustain  or  extend  the  colonial 
establishments  founded  in  the  previous  phase,  or  to  deprive 
rival  nations  of  the  industrial  advantages  connected  with  the 


56  POLITICAL  ECONOMY. 

possession  of  such  establishments.  This  change  of  attitude, 
notwithstanding  its  deplorable  tendency  to  foster  international 
enmities  and  jealousies,  marked  a  real  and  important  progress 
by  pointing  to  industrial  activity  as  the  one  permanent 
practical  destination  of  modern  societies. 

But,  whilst  by  this  sort  of  action  furthering  the  ascendency 
of  the  new  forces,  the  ruling  powers,  both  in  England  and 
France,  betrayed  the  alarm  they  felt  at  the  subversive  ten- 
dencies which  appeared  inherent  in  the  modern  movement  by 
taking  up  in  their  domestic  policy  an  attitude  of  resistance. 
Reaction  became  triumphant  in  France  during  the  latter  half 
of  the  reign  of  Louis  XIV.  under  the  disastrous  influence  of 
Madame  de  Maintenon.  In  England,  after  the  transaction  of 
1688,  by  which  the  Government  was  consolidated  on  the 
double  basis  of  aristocratic  power  and  official  orthodoxy,  the 
state  policy  became  not  so  much  retrograde  as  stationary, 
industrial  conquest  being  put  forward  to  satisfy  the  middle 
class  and  wean  it  from  the  pursuit  of  a  social  renovation. 
In  both  countries  there  was  for  some  time  a  noticeable  check 
in  the  intellectual  development,  and  Eoscher  and  others  have 
observed  that,  in  economic  studies  particularly,  the  first  three 
decades  of  the  eighteenth  century  were  a  period  of  general 
stagnation,  eclecticism  for  the  most  part  taking  the  place  of 
originality.  The  movement  was,  however,  soon  to  be  resumed, 
but  with  an  altered  and  more  formidable  character.  The 
negative  doctrine,  which  had  risen  and  taken  a  definite  form 
in  England,  was  diffused  and  popularised  in  France,  where  it 
became  evident,  even  before  the  decisive  explosion,  that  the 
only  possible  issue  lay  in  a  radical  social  transformation. 
The  partial  schools  of  Voltaire  and  Rousseau  in  different  ways 
led  up  to  a  violent  crisis,  whilst  taking  little  thought  of  the 
conditions  of  a  system  which  could  replace  the  old ;  but  the 
more  complete  and  organic  school,  of  which  Diderot  li  the 
best  representative,  looked  through  freedom  to  a  thorough 
reorganisation.  Its  constructive  aim  is  shown  by  the  design 
of  the  Encydopedie, — a  project,  however,  which  could  have 


SYSTEM  OF  NATURAL  LIBERTY.  57 

only  &  temporary  success,  because  no  real  synthesis  was  forth- 
coming, and  this  joint  production  of  minds  often  divergent 
could  possess  no  more  than  an  external  unity.  It  was  with 
this  great  school  that  the  physiocrats  were  specially  connected  ; 
and,  in  common  with  its  other  members,  whilst  pushing 
towards  an  entire  change  of  the  existing  system,  they  yet 
would  gladly  have  avoided  political  demolition  through  the 
exercise  of  a  royal  dictatorship,  or  contemplated  it  only  as  the 
necessary  condition  of  a  new  and  better  order  of  things.  But, 
though  marked  off  by  such  tendencies  from  the  purely  revo- 
lutionary sects,  their  method  and  fundamental  ideas  were 
negative,  resting,  as  they  did,  essentially  on  the  basis  of  the 
jus  naturae.  We  shall  follow  in  detail  these  French  develop- 
ments in  their  special  relation  to  economic  science,  and  after- 
wards notice  the  corresponding  movements  in  other  European 
countries  which  showed  themselves  before  the  appearance  of 
Adam  Smith,  or  were  at  least  unaffected  by  his  influence. 

BEFORE  ADAM  SMITH. 
France. 

The  more  liberal,  as  well  as  more  rational,  principles  put 
forward  by  the  English  thinkers  of  the  new  type  began,  early 
in  the  eighteenth  century,  to  find  an  echo  in  France,  where 
the  clearer  and  more  vigorous  intellects  were  prepared  for 
their  reception  by  a  sense  of  the  great  evils  which  exaggerated 
mercantilism,  serving  as  instrument  of  political  ambition,  had 
produced  in  that  country.  The  impoverished  condition  of 
the  agricultural  population,  the  oppressive  weight  and  unequal 
imposition  of  taxation,  and  the  unsound  state  of  the  public 
finances  had  produced  a  general  feeling  of  disquiet,  and  led 
several  distinguished  writers  to  protest  strongly  against  the 
policy  of  Colbert  and  to  demand  a  complete  reform. 

The  most  important  amongst  them  was  Pierre  Boisguillebert, 
whose  whole  life  was  devoted  to  these  controversies.  In  his 
statistical  writings  (Detail  de  la  France  sous  le  regne  pres&att 


58  POLITICAL  ECONOMY. 

1697  ;  Factum  de  la  France,  1707),  he  brings  out  in  gloomy 
colours  the  dark  side  of  the  age  of  Louis  XIV.,  and  in  his 
theoretic  works  (Traite  de  la  nature  et  du  commerce  dea 
grains;  Dissertations  sur  la  nature  des  richesses  de  V argent 
et  des  tributs ;  and  Essai  sur  la  rarete  de  I'argent)  ha 
appears  as  an  earnest,  even  passionate,  antagonist  of  the  mer- 
cantile school.  He  insists  again  and  again  on  the  fact  that 
national  wealth  does  not  consist  in  gold  and  silver,  but  io 
useful  things,  foremost  among  which  are  the  products  of  agri- 
culture. He  even  goes  so  far  as  to  speak  of  "  argent  criminel," 
which  from  being  the  slave  of  trade,  as  it  ought  to  be,  had 
become  its  tyrant.  He  sets  the  "  genuinely  French  Sully " 
far  above  the  "  Italianising  Colbert,"  and  condemns  all  arbi- 
trary regulations  affecting  either  foreign  or  internal  commerce, 
especially  as  regards  the  corn  trade.  National  wealth  does 
not  depend  on  Governments,  whose  interference  does  more 
harm  than  good ;  the  natural  laws  of  the  economic  order  of 
things  cannot  be  violated  or  neglected  with  impunity ;  the 
interests  of  the  several  classes  of  society  in  a  system  of  free- 
dom are  identical,  and  those  of  individuals  coincide  with  that 
of  the  state.  A  similar  solidarity  exists  between  different 
nations ;  in  their  economic  dealings  they  are  related  to  the 
world  as  individual  towns  to  a  nation,  and  not  merely  plenty, 
but  peace  and  harmony,  will  result  from  their  unfettered 
intercourse.  Men  he  divides  into  two  classes — those  who  do 
nothing  and  enjoy  everything,  and  those  who  labour  from 
morning  to  night  often  without  earning  a  bare  subsistence ; 
the  latter  he  would  favour  in  every  way.  Here  we  catch  the 
"breath  of  popular  sympathy  which  fills  the  social  atmosphere  of 
the  eighteenth  century.  He  dwells  with  special  emphasis  on 
the  claims  of  agriculture,  •which  had  in  France  fallen  into  un- 
merited neglect,  and  with  a  view  to  its  improvement  calls  for 
a  reform  in  taxation.  He  would  replace  indirect  taxes  by 
taxes  on  income,  and  would  restore  the  payment  of  taxes  in 
kind,  with  the  object  of  securing  equality  of  burden  and 
eliminating  every  element  of  the  arbitrary.  He  has  some 


SYSTEM  OF  NATURAL  LIBERTY.  59 

interesting  views  of  a  general  character  :  thus  he  approximates 
to  a  correct  conception  of  agricultural  rent,  and  he  points^  tp_ 
the  order  in  which  human  wants  follow  each  other, — those 
of  necessity,  convenience,  comfort,  superfluity,  and  ostentation 
succeeding  in  the  order  named,  and  ceasing  in  the  inverse 
order  to  be  felt  as  wealth  decreases.  The  depreciating  tone 
in  which  Voltaire  speaks  of  Boisguillebert  (Siecle  de  Louis 
XIV.,  chap.  30)  is  certainly  not  justified ;  he  had  a  great 
economic  talent,  and  his  writings  contain  important  germs  of 
truth.  But  he  appears  to  have  exerted  little  influence,  theo- 
retical or  practical,  in  his  own  time. 

The  same  general  line  of  thought  was  followed  by  Marshal 
Vauhan  (1633—1707)  in  his  economic  tracts,  especially  that 
bearing  the  title  of  Projet  d'une  dixme  Royale,  1707,  which 
was  suppressed  by  the  authorities,  and  lost  for  him.  the  favour 
of  his  sovereign,  but  has  added  lustre  to  his  name  in  the 
judgment  of  posterity.  He  is  deeply  impressed  with  the 
deplorable  condition  of  the  working  classes  of  France  in  his 
day.  He  urges  that  the  aim  of  the  Government  should  be 
the  welfare  of  all  orders  of  the  community ;  that  all  are 
entitled  to  like  favour  and  furtherance ;  that  the  often  despised 
and  wronged  lower  class  is  the  basis  of  the  social  organisation ; 
that  labour  is  the  foundation  of  all  wealth,  and  agriculture 
the  most  important  species  of  labour;  that  the  most  essential 
condition  of  successful  industry  is  freedom ;  and  that  all  un- 
necessary or  excessive  restrictions  on  manufactures  and  com- 
merce should  be  swept  away.  He  protests  in  particular  against 
the  inequalities  of  taxation,  and  the  exemptions  and  privileges 
enjoyed  by  the  higher  ranks.  With  the  exception  of  some 
duties  on  consumption  he  would  abolish  all  the  existing  taxes, 
and  substitute  for  them  a  single  tax  on  income  and  land, 
impartially  applied  to  all  classes,  which  he  describes  under 
the  name  of  "  Dixme  Royale,"  that  is  to  say,  a  tenth  in  kind 
of  all  agricultural  produce,  and  a  tenth  of  money  income 
chargeable  on  manufacturers  and  traders.1 

1  An  English  translation  of  the  Dixme  Royale  was  published  in  1 708. 


60  POLITICAL  ECONOMY. 

The  liberal  and  humane  spirit  of  Fenelon  led  him  to  aspira 
after  freedom  of  commerce  with  foreign  nations,  and  to  preach 
the  doctrine  that  the  true  superiority  of  one  state  over  another 
lies  in  the  number  indeed,  but  also  in  the  morality,  in- 
telligence, and  industrious  habits  of  its  population.  The 
Telemaque,  in  which  these  views  were  presented  in  an 
attractive  form,  was  welcomed  and  read  amongst  all  ranks  and 
classes,  and  was  thus  an  effective  organ  for  the  propagation  of 
opinion. 

After  these  writers  there  is  a  marked  blank  in  the  field  of 
French  economic  thought,  broken  only  by  the  Reflexions 
Politiques  sur  les  Finances  et  le  Commerce  (1738)  of  Dutot, 
a  pupil  of  Law,  and  the  semi-mercantilist  Essais  Politiquet 
eur  le  Commerce  (1731)  of  Me'lon,  till  we  come  to  the  great 
name  of  Montesquieu.  The  Esprit  des  Lois,  so  far  as  it 
deals  with  economic  subjects,  is  written  upon  the  whole  from 
a  point  of  view  adverse  to  the  mercantile  system,  especially  in 
his  treatment  of  money,  though  in  his  observations  on  colonies 
and  elsewhere  he  falls  in  with  the  ideas  of  that  system.  His 
immortal  service,  however,  was  not  rendered  by  any  special 
research,  but  by  his  enforcement  of  the  doctrine  of  natural 
laws  regulating  social  no  less  than  physical  phenomena. 
There  is  no  other  thinker  of  importance  on  economic  subjects 
in  France  till  the  appearance  of  the  physiocrats,  which  marks 
an  epoch  in  the  history  of  the  science. 

The  heads  of  the  physiocratic  school  were  Francois  Quesnay 
(1694-1774)  and  Jean  Claude  Marie  Vincent,  sieur  de 
Gournay  (1712-1759).  The  principles  of  the  school  had 
been  put  forward  in  1755  by  Richard  Cantillon,  a  Fiench 
merchant  of  Irish  extraction  (Essai  sur  la  nature  du  Commerce 
en  general),  whose  biography  Jevons  has  elucidated,1  and 
whom  he  regards  as  the  true  founder  of  political  economy  j 


1  "  Richard  Cantillon  and  the  Nationality  of  Political  Economy,"  in 
Contemporary  Review,  Jan.  1 88 1.  Cantillon  is  qnoted  in  the  Wealth  Of 
Nations,  bk.  i.  chap.  8. 


SYSTEM  OF  NATURAL  LIBERTY.  6. 

but  it  was  in  the  hands  of  Quesnay  and  Gournay l  that  they 
acquired  a  systematic  form,  and  became  the  creed  of  a  united 
group  of  thinkers  and  practical  men,  bent  on  carrying  them 
into  action.  The  members  of  the  group  called  themselves 
"  les  ^conomistes,"  but  it  is  more  convenient,  because  unam- 
biguous, to  designate  them  by  the  name  "  physiocrates," 
invented  by  Dupont  de  Nemours,  who  was  one  of  their 
number.  In  this  name,  intended  to  express  the  fundamental 
idea  of  the  school,  much  more  is  implied  than  the  subjection 
of  the  phenomena  of  the  social,  and  in  particular  the  economic, 
world  to  fixed  relations  of  co-existence  and  succession.  This 
is  the  positive  doctrine  which  lies  at  the  bottom  of  all  true 
science.  But  the  law  of  nature  referred  to  in  the  title  of  the 
sect  was  something  quite  different.  The  theological  dogma 
which  represented  all  the  movements  of  the  universe  as 
directed  by  divine  wisdom  and  benevolence  to  the  production 
of  the  greatest  possible  sum  of  happiness  had  been  trans- 
formed in  the  hands  of  the  metaphysicians  into  the  conception 
of  a /MS  naturae,  a  harmonious  and  beneficial  code  established 
By  the  favourite  entity  of  these  thinkers,  Nature,  antecedent 
to  human  institutions,  and  furnishing  the  model  to  which 
they  should  be  made  to  conform.  This  idea,  which  Buckle 
apparently  supposes  to  have  been  an  invention  of  Hutcheson's, 
had  come  down  through  Roman  juridical  theory  from  the 
speculations  of  Greece.2  It  was  taken  in  hand  by  the  modern 
negative  school  from  Hobbes  to  Rousseau,  and  used  as  a  power- 
ful weapon  of  assault  upon  the  existing  order  of  society,  with 
which  the  "natural"  order  was  perpetually  contrasted  as  offer- 
ing the  perfect  type  from  which  fact  had  deplorably  diverged. 
The  theory  received  different  applications  according  to  the 
diversity  of  minds  or  circumstances.  By  some  it  was  directed 
against  the  artificial  manners  of  the  times, 'by  others  against 

1  Gournay  strongly  recommended  to    his  friends  Cantillon's  book  M 
"ouvrage  excellent  qu'on  negligeait."     Mimoires  de  Morettet,  i.  38. 

2  See  Cliffe  Leslie's    Essays   in   Political  and  Moral  Philosophy,  p. 


62  POLITICAL  ECONOMY. 

contemporary  political  institutions ;  it  was  specially  employed 
by  the  physiocrats  in  criticising  the  economic  practice  of 
European  Governments. 

The  general  political  doctrine  is  as  follows.  Society  is 
composed  of  a  numher  of  individuals  all  having  the  same 
natural  rights.  If  all  do  not  possess  (as  some  members  of  the 
negative  school  maintained)  equal  capacities,  each  can  at  least 
best  understand  his  own  interest,  and  is  led  by  nature  to  follow 
it.  The  social  union  is  really  a  contract  between  these 
individuals,  the  object  of  which  is  the  limitation  of  the 
natural  freedom  of  each,  just  so  far  as  it  is  inconsistent  with 
the  rights  of  the  others.  Government,  though  necessary,  is  a 
necessary  evil ;  and  the  governing  power  appointed  by  consent 
should  be  limited  to  the  amount  of  interference  absolutely 
required  to  secure  the  fulfilment  of  the  contract.  In  the 
economic  sphere,  this  implies  the  right  of  the  individual  to 
such  natural  enjoyments  as  he  can  acquire  by  his  labour. 
That  labour,  therefore,  should  be  undisturbed  and  unfettered  ; 
and  its  fruits  should  be  guaranteed  to  the  possessor ;  in  other 
words,  property  should  be  sacred.  Each  citizen  must  be 
allowed  to  make  the  most  of  his  labour  ;  and  therefore  freedom 
of  exchange  should  be  ensured,  and  competition  in  the  market 
should  be  unrestricted,  no  monopolies  or  privileges  being 
permitted  to  exist. 

The  physiocrats  then  proceed  with  the  economic  analysis  as 
follows.  Only  those  labours  are  truly  "productive"  which 
add  to  the  quantity  of  raw  materials  available  for  the  purposes 
of  man ;  and  the  real  annual  addition  to  the  wealth  of  the 
community  consists  of  the  excess  of  the  mass  of  agricultural 
products  (including,  of  course,  minerals)  over  their  cost  of 
production.  On  the  amount  of  this  "produit  net"  depends 
the  wellbeing  of  the  community,  and  the  possibility  of  its 
advance  in  civilisation.  The  manufacturer  merely  gives  a  new 
form  to  the  materials  extracted  from  the  earth  ;  the  higher 
value  of  the  object,  after  it  has  passed  through  his  hands,  only 
represents  the  quantity  of  provisions  and  other  materials  used 


SYSTEM  OF  NATURAL  LIBERTY.  63 

and  consumed  in  its  elaboration.  Commerce  does  nothing 
more  than  transfer  the  wealth  already  existing  from  one  hand 
to  another ;  what  the  trading  classes  gain  thereby  is  acquired 
at  the  cost  of  the  nation,  and  it  is  desirable  that  its  amount 
should  be  as  small  as  possible.  The  occupations  of  the 
manufacturer  and  merchant,  as  well  as  the  liberal  professions,^ 
and  every  kind  of  personal  service,  are  "  useful "  indeed,  but 
they  are  "  sterile,"  drawing  their  income,  not  from  any  fund 
which  they  themselves  create,  but  from  the  superfluous 
earnings  of  the  agriculturist.  Perfect  freedom  of  trade  not 
only  rests,  as  we  have  already  seen,  on  the  foundation  of 
natural  right,  but  is  also  recommended  by  the  consideration  that 
it  makes  the  "  produit  ne/","  on  which  all  wealth  and  general 
progress  depend,  as  large  as  possible.  "  Laissez  faire,  laissez 
passer"  should  therefore  be  the  motto  of  Governments.  The 
revenue  of  the  state,  which  must  be  derived  altogether  from 
this  net  product,  ought  to  be  raised  in  the  most  direct  and 
simplest  way, — namely,  by  a  single  impost  of  the  nature  of  a 
land  tax. 

The  special  doctrine  relating  to  the  exclusive  productiveness  of 
agriculture  arose  out  of  a  confusion  between  "value  "  on  the  one 
hand  and  "  matter  and  energy"  on  the  other.  Smith  and  others 
have  shown  that  the  attempt  to  fix  the  character  of  "  sterility  " 
on  manufactures  and  commerce  was  founded  in  error.  And 
the  proposal  of  a  single  impot  territorial  falls  to  the  ground 
with  the  doctrine  on  which  it  was  based.  But  such  influence 
as  the  school  exerted  depended  little,  if  at  all,  on  these 
peculiar  tenets,  which  indeed  some  of  its  members  did  not 
hold.  The  effective  result  of  its  teaching  was  mainly 
destructive.  It  continued  in  a  more  systematic  form  the 
efforts  in  favour  of  the  freedom  of  industry  already  begun  in 
England  and  France.  The  essential  historical  office  of  the 
physiocrats  was  to  discredit  radically  the  methods  followed  by 
the  European  Governments  in  their  dealings  with  industry. 
For  sucn  criticism  as  theirs  there  was,  indeed,  ample  room: 
the  policy  of  Colbert,  which  could  be  only  temporarily  useful, 


64  POLITICAL  ECONOMY. 

had  been  abusively  extended  and  intensified ;  Governmental 
action  had  intruded  itself  into  the  minutest  details  of  business, 
and  every  process  of  manufacture  and  transaction  of  trade  was 
hampered  by  legislative  restrictions.  It  was  to  be  expected 
that  the  reformers  should,  in  the  spirit  of  the  negative  philo- 
sophy, exaggerate  the  vices  of  established  systems  ;  and  there 
can  be  no  doubt  that  they  condemned  too  absolutely  the 
economic  action  of  the  state,  both  in  principle  and  in  its 
historic  manifestations,  and  pushed  the  "  laissez  faire  "  doctrine 
beyond  its  just  limits.  But  this  was  a  necessary  incident  of 
their  connection  with  the  revolutionary  movement,  of  which 
they  really  formed  one  wing.  In  the  course  of  that  movement, 
the  primitive  social  contract,  the  sovereignty  of  the  people, 
and  other  dogmas  now  seen  to  be  untenable,  were  habitually 
invoked  in  the  region  of  politics  proper,  and  had  a  transitory 
utility  as  ready  and  effective  instruments  of  warfare.  And  so 
also  in  the  economic  sphere  the  doctrines  of  natural  rights  of 
buying  and  selling,  of  the  sufficiency  of  enlightened  selfishness 
as  a  guide  in  mutual  dealings,  of  the  certainty  that  each 
member  of  the  society  will  understand  and  follow  his  true 
interests,  and  of  the  coincidence  of  those  interests  with  the 
public  welfare,  though  they  will  not  bear  a  dispassionate 
examination,  were  temporarily  useful  as  convenient  and  ser- 
viceable weapons  for  the  overthrow  of  the  established  order. 
The  tendency  of  the  school  was  undoubtedly  to  consecrate  the 
spirit  of  individualism,  and  the  state  of  non-government.  But 
this  tendency,  which  may  with  justice  be  severely  condemned 
in  economists  of  the  present  time,  was  then  excusable  because 
inevitable.  And,  whilst  it  now  impedes  the  work  of  recon- 
struction which  is  for  us  the  order  of  the  day,  it  then  aided 
the  process  of  social  demolition,  which  was  the  necessary, 
though  deplorable,  condition  of  a  new  organisation. 

These  conclusions  as  to  the  revolutionary  tendencies  of  the 
school  are  not  at  all  affected  by  the  fact  that  the  form  of 
government  preferred  by  Quesnay  and  some  of  his  chief  fol- 
lowers was  what  they  called  a  legal  despotism,  which  should 


SYSTEM  OF  NATURAL  LIBERTY.  «5 

embrace  within  itself  both  the  legislative  and  the  executive 
function.  The  reason  for  this  preference  was  that  an  en- 
lightened central  power  could  more  promptly  and  efficaciously 
introduce  the  policy  they  advocated  than  an  assembly  repre- 
senting divergent  opinions,  and  fettered  by  constitutional 
checks  and  limitations.  Turgot,  as  we  know,  used  the  absolute 
power  of  the  crown  to  carry  into  effect  some  of  his  measures 
for  the  liberation  of  industry,  though  he  ultimately  failed 
because  unsustained  by  the  requisite  force  of  character  in 
Louis  XVI.  But  what  the  physiocratic  idea  with  respect  to 
the  normal  method  of  government  was  appears  from  Quesnay's 
advice  to  the  dauphin,  that  when  he  became  king  he  should 
"  do  nothing,  but  let  the  laws  rule,"  the  laws  having  been  of 
course  first  brought  into  conformity  with  thejiis  naturae.  The 
partiality  of  the  school  for  agriculture  was  in  harmony  with 
the  sentiment  in  favour  of  "  nature  "  and  primitive  simplicity 
which  then  showed  itself  in  so  many  forms  in  France,  especially 
in  combination  with  the  revolutionary  spirit,  and  of  which 
Rousseau  was  the  most  eloquent  exponent.  It  was  also  asso- 
ciated  in  these  writers  with  a  just  indignation  at  the  wretched 
state  in  which  the  rural  labourers  of  France  had  been  left  by 
the  scandalous  neglect  of  the  superior  orders  of  society — a 
state  of  which  the  terrible  picture  drawn  by  La  Bruyere  is  an 
indestructible  record.  The  members  of  the  physiocratic  group 
were  undoubtedly  men  of  thorough  uprightness,  and  inspired 
with  a  sincere  desire  for  the  public  good,  especially  for  the 
material  and  moral  elevation  of  the  working  classes.  Quesnay 
was  physician  to  Louis  XV.,  and  resided  in  the  palace  at 
Versailles;  but  in  the  midst  of  that  corrupt  court  he  main- 
tained  his  integrity,  and  spoke  with  manly  frankness  what  he 
believed  to  be  the  truth.  And  never  did  any  statesman  devote 
himself  with  greater  singleness  of  purpose  or  more  earnest 
endeavour  to  the  service  of  his  country  than  Turgot,  who  wag 
the  principal  practical  representative  of  the  school. 

The  publications  in  which  Quesnay  expounded  his  system 
were  the  following : — Two  articles,  on  "  Ferrniers "  and  OB 


66  POLITICAL  ECONOMY. 

"Grains,"  in  the  Encydopedie  of  Diderot  and  D'Alemberl 
(1756,  1757) ;  a  discourse  on  the  law  of  nature  in  the  Physio- 
cratie  of  Dupont  de  Nemours  (1768);  Maximes  generates  de 
gouvernement  economique  d'un  royaume  agricole  (1758),  and 
the  simultaneously  published  Tableau  Economique  avec  son 
explication,  ou  Exirait  des  Economies  Royales  de  Sully  (with 
the  celebrated  motto  "pauvres  paysans,  pauvre  royaume; 
pauvre  royaume,  pauvre  roi");  Dialogue  sur  le  commerce  et 
les  travaux  des  artisans  ;  and  other  minor  pieces.  The  Tableau 
Economique,  though  on  account  of  its  dryness  and  abstract 
form  it  met  with  little  general  favour,  may  be  considered  the 
principal  manifesto  of  the  school.  It  was  regarded  by  the 
followers  of  Quesnay  as  entitled  to  a  place  amongst  the  fore- 
most products  of  human  wisdom,  and  is  named  by  the  elder 
Mirabeau,  in  a  passage  quoted  by  Adam  Smith,1  as  one  of  the 
three  great  inventions  which  have  contributed  most  to  the 
stability  of  political  societies,  the  other  two  being  those  of 
writing  and  of  money.  Its  object  was  to  exhibit  by  means  of 
certain  formulas  the  way  in  which  the  products  of  agriculture, 
which  is  the  only  source  of  wealth,  would  in  a  state  of  perfect 
liberty  be  distributed  among  the  several  classes  of  the  com 
munity  (namely,  the  productive  classes  of  the  proprietors  and 
cultivators  of  land,  and  the  unproductive  class  composed  of 
manufacturers  and  merchants),  and  to  represent  by  other  for- 
mulas the  modes  of  distribution  which  take  place  under  system? 
of  Governmental  restraint  and  regulation,  with  the  evil  results 
arising  to  the  whole  society  from  different  degrees  of  such 
violations  of  the  natural  order.  It  follows  from  Quesnay's 
theoretic  views  that  the  one  thing  deserving  the  solicitude  of 
the  practical  economist  and  the  statesman  is  the  increase  of 
the  net  product;  and  he  infers  also  what  Smith  afterwards 
affirmed  on  not  quite  the  same  ground,  that  the  interest  of  the 
landowner  is  "strictly  and  inseparably  connected  with  the 
general  interest  of  the  society."  * 

*  Wealth  of  Nation*,  bk.  iv.  chap.  9.  a  Ibid.  bk.  i.,  chap.  II. 


SYSTEM  OF  NATURAL  LIBERTY.  67 

M.  de  Gournay,  as  we  have  seen,  was  regarded  as  one  of 
the  founders  of  the  school,  and  appears  to  have  exercised  some 
influence  even  upon  the  formation  of  Quesnay's  own  opinions. 
With  the  exception  of  translations  of  Culpeper  and  Child,1 
Gournay  wrote  nothing  hut  memoirs  addressed  to  ministers, 
which  have  not  seen  the  light ;  but  we  have  a  full  statement 
of  his  views  in  the  Bloge  dedicated  to  his  memory  hy  his 
illustrious  friend  Turgot.  Whilst  Quesnay  had  spent  his 
youth  aiaidst  rural  scenes,  and  had  been  early  familiar  with 
the  labours  of  the  field,  Gournay  had  been  bred  as  a  merchant, 
and  had  passed  from  the  counting-house  to  the  office  of  inten- 
dant  of  commerce.  They  thus  approached  the  study  of  political 
economy  from  different  sides,  and  this  diversity  of  their  ante- 
cedents may  in  part  explain  the  amount  of  divergence  which 
existed  between  their  views.  Gournay  softened  the  rigour 
of  Quesnay's  system,  and  brought  it  nearer  to  the  truth,  by 
rejecting  what  Smith  calls  its  "capital  error"  — the  doctrine, 
namely,  of  the  unproductiveness  of  manufactures  and  com- 
merce.  He  directed  his  efforts  to  the  assertion  and  vindica- 
tion of  the  principle  of  industrial  liberty,  and  it  was  by  him 
that  this  principle  was  formulated  in  the  phrase,  since  so  often 
heard  for  good  and  for  evil,  "  Laissez  faire  et  laissez  passer." 
One  of  the  earliest  aud  most  complete  adherents  of  the  physio- 
cratic  school,  as  well  as  an  ardent  and  unwearied  propagator 
of  its  doctrines,  was  Victor  Mirabeau,  whose  sincere  and  inde- 
pendent, though  somewhat  perverse  and  whimsical,  character 
is  familiar  to  English  readers  through  Carlyle's  essay  on  his 
more  celebrated  son.  He  had  expressed  some  physiocratic 
views  earlier  than  Quesnay,  hut  owned  the  latter  for  his  spiritual 
father,  and  adopted  most  of  his  opinions,  the  principal  dif- 
ference being  that  he  was  favourable  to  the  petite  as  opposed 
to  the  grande  culture,  which  latter  was  ^referred  by  his 
chief  as  giving,  not  indeed  the  largest  gross,  but  the  largest 

1  Gonrnay's  inspiration  was,  without  doubt,  largely  English.  "II 
avait  lu,"  says  Morellet,  "  de  bons  livres  Anglais  d'Economie  politkjue, 
tels  qne  Petty,  Davenant,  Gee,  Child,  &c." — Alemoires,  i.  38. 


68  POLITICAL  ECONOMY. 

net  product.  Mirabeau's  principal  writings  were  Ami  dei 
Hommes,  ou  traite  sur  la  population  (1756,  1760),  Thwrifi  dt 
Vimpot  (1760),  Les  J&conomiques  (1769),  and  Philosophic 
rurale,  ou  Economic  generate  et  politique  de  t  Agriculture 
(1763).  The  last  of  these  was  the  earliest  complete  expositua 
of  the  physiocratic  system.  Another  earnest  and  persevering 
apostle  of  the  system  was  Dupont  de  Nemours  (1739-1817), 
known  by  his  treatises  De  I'exportation  et  de  ^importation  de* 
grains  (1764),  De  I'origine  et  des  progres  d'une  science  nouvelle 
(1767),  Du  commerce  de  la  Compagnie  des  Indes  (1767),  and 
especially  by  his  more  comprehensive  work  Physiocratie,  ou 
Constitution  naturelle  du  gouvernement  le  plus  avantageux  au 
genre  humain  (1768).  The  title  of  this  work  gave,  as  has 
been  already  mentioned,  a  name  to  the  school.  Another 
formal  exposition  of  the  system,  to  which  Adam  Smith  refers 
as  the  "  most  distinct  and  best  connected  account "  of  it,  was 
produced  by  Mercier-Lariviere,  under  the  title  L'Ordre  naturel 
et  essentiel  des  societes  politiques  (1767),  a  title  which  is  inte- 
resting as  embodying  the  idea  of  the  jus  naturae.  Both  he  and 
Dupont  de  Nemours  professed  to  study  human  communities, 
not  only  in  relation  to  their  economic,  but  also  to  their  political 
and  general  social  aspects;  but,  notwithstanding  these  larger 
pretensions,  their  views  were  commonly  restricted  in  the  main 
to  the  economic  sphere;  at  least  material  considerations"  de- 
cidedly preponderated  in  their  inquiries,  as  was  naively  indi- 
cated by  Lariviere  when  he  said,  "  Property,  security,  liberty — 
these  comprise  the  whole  social  order ;  the  right  of  property  is 
a  tree  of  which  all  the  institutions  of  society  are  branches." 

The  most  eminent  member  of  the  group  was  without  doubt 
AnrnTRobert  Jacques  Turgot  (1727-1781).  This  is  not  the 
place  to  speak  of  his  noble  practical  activity,  first  as  intendant 
of  Limoges,  and  afterwards  for  a  brief  period  as  finance 
minister,  or  of  the  circumstances  which  led  to  his  removal 
from  office,  and  the  consequent  failure  of  his  efforts  for  the 
salvation  of  France.  His  economic  views  are  explained  in 
the  introductions  to  his  edicts  and  ordinances,  in  letters  and 


SYSTEM  OF  NATURAL  LIBERTY.  69 

occasional  papers,  but  especially  in  his  Reflexions  sur  la  forma- 
tion et  la  distribution  des  richesses  (1766).  This  is  a  con- 
densed but  eminently  clear  and  attractive  exposition  of  the 
fundamental  principles  of  political  economy,  as  they  were  con- 
ceived by  the  physiocrats.  It  embodies,  indeed,  the  erroneous 
no  less  than  the  sound  doctrines  of  that  school ;  but  several 
subjects,  especially  the  various  forms  of  land-economy,  the 
different  employments  of  capital,  and  the  legitimacy  of 
interest,  are  handled  in  a  generally  just  as  well  as  striking 
manner ;  and  the  mode  of  presentation  of  the  ideas,  and  the 
luminous  arrangement  of  the  whole,  are  Turgot's  own.  The 
treatise,  which  contains  a  surprising  amount  of  matter  in  pro- 
portion to  its  length,  must  always  retain  a  place  among  the 
classics  of  the  science. 

The  physiocratic  school  never  obtained  much  direct  popular 
influence,  even  in  its  native  country,  though  it  strongly 
attracted  many  of  the  more  gifted  and  earnest  minds.  Its 
members,  writing  on  dry  subjects  in  an  austere  and  often 
heavy  style,  did  not  find  acceptance  with  a  public  which 
demanded  before  all  things  charm  of  manner  in  those  who 
addressed  it.  When  Morellet,  one  of  their  number,  entered 
the  lists  with  Galiani,  it  was  seen  how  esprit  and  eloquence 
could  triumph  over  science,  solid  indeed,  but  clumsy  in  its 
movements.1  The  physiocratic  tenets,  which  were  in  fact 
partially  erroneous,  were  regarded  by  many  as  chimerical,  and 
were  ridiculed  in  the  contemporary  literature,  as,  for  example, 
the  impdt  unique  by  Voltaire  in  his  L'homme  aux  quarante 
icus,  which  was  directed  in  particular  against  Mercier- 
Lariviere.  It  was  justly  objected  to  the  group  that  they  were 

1  On  Galiani's  Dialogues,  see  page  72.  Soon  after  the  appearance  of 
this  book  Turgot  wrote  to  Mile.  Lespinasse — "Je  crois  possible  de 
lui  faire  une  tres  bonne  re"ponse  ;  mais  cela  demande  bien  de  1'art.  Lea 
^conomistes  sont  trop  confiants  pour  combattre  contre  un  si  adroit 
ferrailleur.  Pour  1'abbe1  Morellet,  il  ne  faut  pas  qu'il  y  pense." 
Morellet's  work  was  prohibited  by  the  Controller-General  Terray; 
though  printed  in  1770,  some  months  after  Galiani's,  it  waa  not 
published  till  1774. 


70  POLITICAL  ECONOMY. 

too  absolute  in  their  view  of  things ;  they  supposed,  as  Smith 
remarks  in  speaking  of  Quesnay,  that  the  body-politic  could 
thrive  only  under  one  precise  regime, — that,  namely,  which 
they  recommended, — and  thought  their  doctrines  universally 
and  immediately  applicable  in  practice.1  They  did  not,  as 
theorists,  sufficiently  take  into  account  national  diversities,2 
or  different  stages  in  social  development;  nor  aid  they,  as 
politicians,  adequately  estimate  the  impediments  which  ignor- 
ance, prejudice,  and  interested  opposition  present  to  enlightened 
statesmanship.  It  is  possible  that  Turgot  himself,  as  Grimm 
suggests,  owed  his  failure  in  part  to  the  too  unbending  rigour 
of  his  policy  and  the  absence  of  any  attempt  at  conciliation. 
Be  this  as  it  may,  his  defeat  helped  to  impair  the  credit  of  his 
principles,  which  were  represented  as  having  been  tried  and 
found  wanting. 

The  physiocratic  system,  after  guiding  in  some  degree 
the  policy  of  the  Constituent  Assembly,  and  awakening  a 
few  echoes  here  and  there  in  foreign  countries,  soon  ceased 
to  exist  as  a  living  power ;  but  the  good  elements  it  com- 
prised were  not  lost  to  mankind,  being  incorporated  into  the 
Rounder  and  more  complete  construction  of  Adam  Smith. 

ITALY. 

In  Italy,  as  in  the  other  European  nations,  there  was  little 
activity  in  the  economic  field  during  the  first  half  of  the 
eighteenth  century.  It  was  then,  however,  that  a  really 
remarkable  man  appeared,  the  archdeacon  Salustio  Antonio 
Bandini  (1677-1760),  author  of  the  Discorso  sulla  Maremma 
Sienese,  written  in  1737,  but  not  published  till  1775.  The 

1  Hume,  in  a  letter  to  M orellet,  1 769,  calls  them  "  the  set  of  men  the 
most  chimerical  and  arrogant  that  now  exist."     He  seems  intentionally 
to  ignore  Morellet's  close  connection  with  them. 

2  Turgot  said,  "  Quiconque  n'oublie  pas  qu'il  y  a  des  e"tats  politiques 
se"pare"s  les  uns  des  autres  et  constitue's  diversement,  ne  traitera  jamaia 
bien  aucuue  question  d'Economie  politique. " — Letter  to  MUe.  Ltspinasse, 
1770. 


SYSTEM  OF  NATURAL  LIBERTY.  71 

object  of  the  work  was  to  raise  the  Maremma  from  the 
wretched  condition  into  which  it  had  fallen  through  the 
decay  of  agriculture.  This  decay  he  showed  to  be,  at  least 
in  part,  the  result  of  the  wretched  fiscal  system  which  wae 
in  force ;  and  his  book  led  to  important  reforms  in  Tuscany, 
where  his  name  is  held  in  high  honour.  Not  only  by 
Pecchio  and  other  Italian  writers,  but  by  Reseller  also,  he 
is  alleged  to  have  anticipated  some  leading  doctrines  of  the 
physiocrats,  but  this  claim  is  disputed.  There  was  a  remarkable 
renascence  of  economic  studies  in  Italy  during  the  latter  half 
of  the  century,  partly  due  to  French  influence,  and  partly,  it 
would  appear,  to  improved  government  in  the  northern  states. 
The  movement  at  first  followed  the  lines  of  the  mercantile 
school.  Thus,  in  Antonio  Broggia's  Trattati  dei  tributi  e  delle 
monete  e  del  governo  politico  della  societa  (1743),  and  Girolamo 
Belloni's  Dissertazione  sopra  il  commercio  (1750),  which  seems 
to  have  had  a  success  and  reputation  much  above  its  merits, 
mercantilist  tendencies  decidedly  preponderate.  But  the  most 
distinguished  writer  who  represented  that  economic  doctrine 
in  Italy  in  the  last  century  was  Antonio  Genovesi,  a  Neapolitan 
(1712-1769).  He  felt  deeply  the  depressed  intellectual  and 
moral  state  of  his  fellow-countrymen,  and  aspired  after  _a 
revival  of  philosophy  and  reform  of  education  as  the  first 
condition  of  progress  and  wellbeing.  With  the  object  of  pro- 
tecting him  from  the  theological  persecutions  which  threatened 
him  on  account  of  his  advanced  opinions,  Bartolomeo  Intieri, 
of  whom  we  shall  hear  again  in  relation  to  Galiani,  founded 
in  1755,  expressly  for  Genovesi,  a  chair  of  commerce  and 
mechanics,  one  of  the  conditions  of  foundation  being  that  it 
should  never  be  filled  by  a  monk.  This  was  the  first  pro-  . 
feiisorship  of  economics  established  in  Europe  ;  the  second  wag  ^ 
founded  at  Stockholm  in  1758,  and  the  third  in  Lombardy 
ten  years  later,  for  Beccaria.  The  fruit  of  the  labours  of 
Genovesi  in  this  chair  was  his  Lezioni  di  commercio,  ossia  dt 
economic/,  civile  (1769),  which  contained  the  first  systematic 
treatment  of  the  whole  subject  which  had  appeared  in  Italy. 


7«  POLITICAL  ECONOMY. 

As  the  model  for  Italian  imitation  he  held  up  England,  a 
country  for  which,  says  Pecchio,  he  had  a  predilection  almost 
amdunting  to  fanaticism.  He  does  not  rise  above  the  false 
economic  system  which  England  then  pursued ;  but  he  rejects 
some  of  the  grosser  errors  of  the  school  to  which  he  belonged  ; 
he  advocates  the  freedom  of  the  corn  trade,  and  deprecates 
regulation  of  the  interest  on  loans.  In  the  spirit  of  his  age, 
he  denounces  the  relics  of  mediaeval  institutions,  such  as 
entails  and  tenures  in  mortmain,  as  impediments  to  the 
national  prosperity.  Ferdinando  Galiani  was  another  dis- 
tinguished disciple  of  the  mercantile  school.  Before  he  had 
completed  his  twenty-first  year  he  published  a  work  on  money 
(Ddla  tnoneta  libri  cinque,  1750),  the  principles  of  which  are 
supposed  to  have  been  dictated  by  two  experienced  practical 
men,  the  Marquis  Rinuccini  and  Bartolomeo  Intieri,  whose 
name  we  have  already  met.  But  his  reputation  was  made 
by  a  book  written  in  French  and  published  in  Paris,  where 
he  was  secretary  of  embassy,  in  1770,  namely,  his  Dialogues 
sur  le  commerce  des  Hies.  This  work,  by  its  light  and  pleasing 
style,  and  the  vivacious  wit  with  which  it  abounded,  delighted 
Voltaire,  who  spoke  of  it  as  a  book  in  the  production  of  which 
Plato  and  Moliere  might  have  been  combined  !  1  The  author, 
says  Pecchio,  treated  his  arid  subject  as  Fontenelle  did  the 
vortices  of  Descartes,  or  Algarotti  the  Newtonian  system  of 
the  world.  The  question  at  issue  was  that  of  the  freedom  of 
the  corn  trade,  then  much  agitated,  and,  in  particular,  the 
policy  of  the  royal  edict  of  1764,  which  permitted  the  ex- 
portation of  grain  so  long  as  the  price  had  not  arrived  at  a 
certain  height.  The  general  principle  he  maintains  is  that 
the  best  system  in  regard  to  this  trade  is  to  have  no  system, 
"S— countries  differently  circumstanced  requiring,  according  to 
^him,  different  modes  of  treatment.  This  seems  a  lame  and 
impotent  conclusion  from  the  side  of  science;  yet  doubtless 

1  So  also  Grimm  :  "  C'est  Platon  avec  la  verve  et  lea  gestei 
d'Arlequin."  Diderot  called  the  book  "  module  de  dialogues  qui  restera 
I  *6ti  dea  lettrea  de  Pascal." 


SYSTEM  OF  NATURAL  LIBERTY.  7$ 

the  physiocrats,  with  whom  his  controversy  lay,  prescribed 
on  this,  as  on  other  subjects,  rules  too  rigid  for  the  safe 
guidance  of  statesmen,  and  Galiani  may  have  rendered  a 
real  service  by  protesting  against  their  absolute  solutions  of 
practical  problems.  He  fell,  however,  into  some  of  the  most 
serious  errors  of  the  mercantilists, — holding,  as  indeed  did  also 
Voltaire  and  even  Verri,  that  one  country  cannot  gain  with- 
out another  losing,  and  in  his  earlier  treatise  going  so  far  as  to 
defend  the  action  of  Governments  in  debasing  the  currency. 

Amongst  the  Italian  economists  who  were  most  under  the 
influence  of  the  modern  spirit,  and  in  closest  harmony  with  the 
general  movement  which  was  impelling  the  Western  nations 
towards  a  new  social  order,  Cesare  Beccaria  (1738-1794)  holds 
a  foremost  place.  He  is  best  known  by  his  celebrated  treatise 
Dei  delitti  e  delle  pene,  by  which  Voltaire  said  he  had  made 
himself  a  benefactor  of  all  Europe,  and  which,  we  are  told, 
has  been  translated  into  twenty-two  languages.  The  Empress 
Catherine  having  invited  him  to  fix  his  residence  at  St. 
Petersburg,  the  Austrian  Government  of  Lombardy,  in  order 
to  keep  him  at  home,  established  expressly  for  him  a  chair  of 
political  economy ;  and  in  his  Elementi  di  economia  pubblica 
(1769-1771  ;  not  published,  however,  till  1804)  are  embodied 
his  teachings  as  professor.  The  work  is  unfinished :  he  had 
divided  the  whole  subject  under  the  heads  of  agriculture, 
manufactures,  commerce,  taxation,  government ;  but  he  has 
treated  adequately  only  the  first  two  heads,  and  the  last  two 
not  at  all,  having  been  called  to  take  part  in  the  councils  of  the 
state.  He  was  in  some  degree  under  the  influence  of  physio- 
cratic  ideas,  and  holds  that  agriculture  is  the  only  strictly 
productive  form  of  industry,  whilst  manufactures  and  artisans 
are  a  sterile  class.  He  was  strongly  opposed  to  monopolies 
and  privileges,  and  to  corporations  in  arts  and  trades;  in 
general  he  warmly  advocated  internal  industrial  freedom, 
though  in  regard  to  foreign  commerce  a  protectionist.  In  the 
special  case  of  the  corn  trade  he  was  not,  any  more  than 
Galiani,  a  partisan  of  absolute  liberty.  His  exposition  of 


74  POLITICAL  ECONOMY. 

economic  principles  is  concise  and  sententious,  and  he  often 
states  correctly  the  most  important  considerations  relating  to 
his  subject  without  adding  the  developments  which  would 
be  desirable  to  assist  comprehension  and  strengthen  convic- 
tion. Thus  on  fixed  capital  (capitali  fondatori),  as  distinct 
from  circulating  (annui),  in  its  application  to  agriculture,  he 
presents  in  a  condensed  form  essentially  the  same  explana- 
tions as  Turgot  about  the  same  time  gave  ;  and  on  the  division 
of  labour  and  the  circumstances  which  cause  different  rates  of 
wages  in  different  employments,  he  in  substance  comes  near 
to  Smith,  but  without  the  fulness  of  illustration  which  is  so 
attractive  a  feature  of  the  Wealth  of  Nations.  Pietro  Verri 
(1728-1797),  an  intimate  and  life-long  friend  of  Beccaria,  waa 
for  twenty-five  years  one  of  the  principal  directors  of  the 
administration  of  Lombardy,  in  which  capacity  he  originated 
many  economic  and  other  reforms.  In  his  Riflessioni  sulle 
leggi  vincolanti,  principalmente  nel  commercio  de'  grani  (written 
in  1769,  printed  in  1796),  he  considers  the  question  of  the 
regulation  of  the  corn  trade  both  historically  and  in  the  light 
of  theoretic  principles,  and  arrives  at  the  conclusion  that 
liberty  is  the  best  remedy  against  famine  and  against  excessive 
fluctuations  of  price.  He  is  generally  opposed  to  Govern- 
mental interference  with  internal  commerce,  as  well  as  to 
trade  corporations,  and  the  attempts  to  limit  prices  or  fix  the 
rate  of  interest,  but  is  in  favour  of  the  protection  of  national 
industry  by  a  judiciously  framed  tariff.  These  views  are 
explained  in  his  Meditazioni  sulV  economia  politica  (1771),  an 
elementary  treatise  on  the  science,  which  was  receivevl  with 
favour,  and  translated  into  several  foreign  languages.  A 
primary  principle  with  him  is  what  he  calls  the  augmenta- 
tion of  reproduction — that  is,  in  Smith's  language,  of  "  the 
annual  produce  of  the  land  and  labour "  of  a  nation ;  and 
by  its  tendency  to  promote  or  to  restrict  this  augmentation, 
he  tests  every  enactment  and  institution.  Accordingly, 
unlike  Beccaria,  he  prefers  the  petite  to  the  grande  culture, 
as  giving  a  larger  total  produce.  In  dealing  with  taxation, 


SYSTEM  OF  NATURAL  LIBERTY.  75 

he  rejects  the  physiocratic  proposal  of  a  single  impot  terri- 
torial.1 Giovanni  R.  Carli  (1720-1795),  also  an  official  pro- 
moter of  the  reforms  in  the  government  of  Austrian  Lombardy, 
besides  learned  and  sound  treatises  on  money,  was  author  of 
Ragionamenti  sopra  i  bilanci  economici  delle  nazioni,  in  which 
he  shows  the  falsify  of  the  notion  that  a  state  gains  or  loses  in 
foreign  commerce  according  to  the  so-called  balance  of  trade. 
In  his  letter  to  Pompeo  JSTeri  Sul  liber o  commercio  de'  grant 
(1771),  he  takes  np  a  position  similar  to  that  of  Galiani, 
regarding  the  question  of  the  freedom  of  the  corn  trade  as  not 
BO  much  a  scientific  as  an  administrative  one,  to  be  dealt  with 
differently  under  different  local  or  other  conditions.  Reject- 
ing the  physiocratic  doctrine  of  the  exclusive  productiveness 
of  agriculture,  he  illustrates  in  an  interesting  way  the  neces- 
sity of  various  economic  classes  in  a  society,  and  the  reflex 
agency  of  manufactures  in  stimulating  the  cultivation  of  the 
soil.  Giambattista  Vasco  (1733-1796)  wrote  discourses  on 
several  questions  proposed  by  academies  and  sovereigns.  In 
these  he  condemns  trade  corporations  and  the  attempts  by 
Governments  to  fix  the  price  of  bread  and  to  limit  the  interest 
on  loans.  In  advocating  the  system  of  a  peasant  proprietary, 
he  suggests  that  the  law  should  determine  the  minimum  and 
maximum  portions  of  land  which  a  citizen  should  be  per- 
mitted to  possess.  He  also,  with  a  view  to  prevent  the  undue 
accumulation  of  property,  proposes  the  abolition  of  the  right 
of  Request,  and  the  equal  division  of  the  inheritance  amongst 
the  children  of  the  deceased.  Gaetano  Filangieri  (1752-1788), 
one  of  the  Italian  writers  of  the  last  century  whose  names  are 
most  widely  known  throughout  Europe,  devoted  to  economic 

1  J.  S.  Mill,  in  his  Principles,  bk.  i.  chap.  I,  takes  credit  to  his  father 
for  having  first  illustrated  and  made  prominent  in  relation  to  produc- 
tion what  he  strangely  calls  "a  fundamental  principle  of  Political 
Economy,"  namely,  that  "all  that  man  does  or  can  do  with  matter"  is 
to  "  move  one  thing  to  or  from  another  "  But  this  is  clearly  put  forward 
by  Verri  in  his  Meditazioni,  sect.  3:  "Accostare  e  separare  sono  gli 
unici  element!  che  1'ingegno  nmano  ritrova  analizzando  1'idea  doll* 
riproduzione." 


76  POLITICAL  ECONOMY. 

questions  the  second  book  of  his  Scienza  della  legislazione  (5 
vols.,  1780—1785).  Filled  with  reforming  ardour  and  a  j.'as- 
sionate  patriotism,  he  employed  his  vehement  eloquence  in 
denouncing  all  the  abuses  of  his  time.  Apparently  without 
any  knowledge  of  Adam  Smith,  he  insists  on  unlimited  free- 
dom  of  trade,  calls  for  the  abolition  of  the  mediaeval  institu- 
tions which  impeded  production  and  national  wellbeing,  and 
condemns  the  colonial  system  then  followed  by  England, 
Spain,  and  Holland.  He  prophecies,  as  Kaynal,  Turgot,  and 
Genovesi  had  done  before  him,  that  all  America  would  one 
day  be  independent,  a  prediction  which  probably  helped  to 
elicit  Benjamin  Franklin's  tribute  of  admiration  for  his  work. 
Bather  a  propagator  than  a  discoverer,  he  sometimes  adopted 
from  others  erroneous  opinions,  as,  for  example,  when  he 
approves  the  impdt  unique  of  the  physiocrats.  On  the  whole, 
however,  he  represents  the  most  advanced  political  and  social 
tendencies  of  his  age ;  whilst  strongly  contrasted  with  Beccaria 
in  temperament  and  style,  he  was  a  worthy  labourer  in  the 
same  cause  of  national  and  universal  progress.  Ludovico 
Kicci  (1742-1799)  was  author  of  an  able  report  Sulla  riforma 
degli  istituti  pii  della  cittct,  di  Modena  (1787).  He  treated  the 
subject  of  poor  relief  and  charitable  institutions  in  so  general 
a  way  that  the  work  possesses  a  universal  and  permanent  in- 
terest. He  dwells  on  the  evils  of  indiscriminate  relief  as 
tending  to  increase  the  misery  it  seeks  to  remove,  and  as 
lowering  the  moral  character  of  a  population.  He  exposes 
especially  the  abuses  connected  with  lying-in  and  foundling 
hospitals.  There  is  much  in  him  which  is  akin  to  the  views 
of  Malthus ;  like  him  he  is  opposed  to  any  state  provision  for 
the  destitute,  who  ought,  he  thinks,  to  be  left  to  voluntary 
private  beneficence.  Ferdinando  Paoletti  (1717-1801)  was 
an  excellent  and  public-spirited  priest,  who  did  much  for  the 
diffusion  of  intelligence  amongst  the  agricultural  population  of 
Tuscany,  and  for  the  lightening  of  the  taxes  which  pressed 
upon  them.  He  corresponded  with  Mirabeau  ("  Friend  of 
Men "),  and  appears  to  hare  accepted  the  physiocratic  doc- 


SYSTEM  OF  NATURAL  LIBERTY.  77 

trines,  at  least  in  their  general  substance.  He  was  author  of 
Pensieri  sopra  Vagricoltura  (1769),  and  of  I  veri  mezzi  dt 
render  felici  le  societd.  (1772);  in  the  latter  he  advocates  the 
freedom  of  the  corn  trade.  The  tract  II  Colbertismo  (1791) 
by  Count  Francesco  Mengotti  is  a  vigorous  protest  against  the 
extreme  policy  of  prohibition  and  protection,  which  may  still 
be  read  with  interest.  Mengotti  also  wrote  (1791)  a  treatise 
Del  commercio  de'  Romani,  directed  mainly  against  the  ex- 
aggerations of  Huet  in  his  Histoire  du  commerce  et  de  la 
navigation  des  anciens  (1716),  and  useful  as  marking  the  broad 
difference  between  the  ancient  and  modern  civilisations. 

Here  lastly  may  be  mentioned  another  Italian  thinker  who, 
eminently  original  and  even  eccentric,  cannot  easily  be  classed 
among  his  contemporaries,  though  some  Continental  writers 
of  our  own  century  have  exhibited  similar  modes  of  thought. 
This  was  Giammaria  Ortes  (1713-1790).  He  is  opposed  to 
the  liberalist  tendencies  of  his  time,  but  does  not  espouse  the 
doctrines  of  the  mercantile  system,  rejecting  the  theory  of  the 
balance  of  trade,  and  demanding  commercial  freedom.  It  is 
in  the  Middle  Ages  that  he  finds  his  social  and  economic 
type.  He  advocates  the  maintenance  of  church  property,  is 
averse  to  the  ascendency  of  the  money  power,  and  has  the 
mediaeval  dislike  for  interest  on  loans.  He  entertains  the 
singular  idea  that  the  wealth  of  communities  is  always  and 
everywhere  in  a  fixed  ratio  to  their  population,  the  latter  being 
determined  by  the  former.  Poverty,  therefore,  necessarily 
waits  on  wealth,  and  the  rich,  in  becoming  so,  only  gain  what 
the  poor  lose.  Those  who  are  interested  in  the  improve- 
ment of  the  condition  of  the  people  labour  in  vain,  so  long 
as  they  direct  their  efforts  to  the  increase  of  the  sum 
of  the  national  wealth,  which  it  is  beyond  their  power 
to  alter,  instead  of  to  the  distribution  of  that  wealth,  which 
it  is  possible  to  modify.  The  true  remedy  for  poverty  lies 
in  mitigating  the  gain-pursuing  propensities  in  the  rich  and 
in  men  of  business.  Ortes  studied  in  a  separate  work  the 
subject  of  population;  he  formulates  its  increase  as  "geo- 


78  POLITICAL  ECONOMY. 

metrical,"  but  recognises  that,  as  a  limit  is  set  to  such  increase 
amongst  the  lower  animals  by  mutual  destruction,  so  is  it  in 
the  human  species  by  "  reason  " — f:he  "  prudential  restraint  " 
of  which  Malthas  afterwards  made  so  much.  He  regards  the 
institution  of  celibacy  as  no  less  necessary  and  advantageous 
than  that  of  marriage.  He  enunciates  what  has  since  been 
known  as  the  "  law  of  diminishing  returns  to  agricultural  iii- 
dustry."  He  was  careless  as  to  the  diffusion  of  his  writings;  and 
hence  they  remained  almost  unknown  till  they  were  included 
in  the  Custodi  collection  of  Italian  economists,  when  they 
attracted  much  attention  by  the  combined  sagacity  and  way- 
wardness which  marked  their  author's  intellectual  character. 

SPAIN. 

The  same  breath  of  a  new  era  which  was  in  the  air  else- 
where  in  Europe  made  itself  felt  also  in  Spain. 

In  the  earlier  part  of  the  eighteenth  century  Geronimo 
Ustariz  had  written  his  Teorica  y  Practica  del  Comercio 
y  Marina  (1724;  published,  1740;  Eng.  transl.  by  John 
Kippax,  1751  ;  French  by  Forbonnais,  1753),  in  which  he 
carries  mercantile  principles  to  their  utmost  extreme. 

The  reforming  spirit  of  the  latter  half  of  the  century  was 
best  represented  in  that  country  by  Pedro  Ikodriguez,  Count 
of  Campomanes  (1723—1802).  He  pursued  with  ardour  the 
same  studies  and  in  some  degree  the  same  policy  as  his  illus- 
trious contemporary  Turgot,  without,  however,  having  arrived 
at  so  advanced  a  point  of  view.  He  was  author  of  Respmsta 
fiscal  sobre  abolir  la  tasa  y  establecer  el  comercio  de  granos 
(1764),  Discurso  sobre  el  fomento  de  industria  popolar  (1774), 
and  Discurso  sobre  la  education  de  los  artesanos  y  su  fomento 
(1775^.  By  means  of  these  writings,  justly  eulogised  by 
Robertson,1  as  well  as  by  his  personal  efforts  as  minister,  he 
/  sought  to  establish  the  freedom  of  the  corn  trade,  to  remove 
the  hindrances  to  industry  arising  from  mediaeval  survivals, 

1  Hittory  of  America,  note  193. 


SYSTEM  OF  NATURAL  LIBERTY.  79 

t'>  ,-ive  a  large  development  to  manufactures,  and  to  liberate 
agriculture  from  the  odious  burdens  to  which  it  was  subject. 
He  saw  that,  notwithstanding  the  enlightened  administration 
of  Charles  III.,  Spain  still  suffered  from  the  evil  results  of 
ths  blind  confidence  reposed  by  her  people  in  her  gold  mines, 
an  1  enforced  the  lesson  that  the  real  sources  of  the  wealth  and 
power  of  his  country  must  be  sought,  not  in  America,  but  in 
her  own  industry. 

In  both  Italy  and  Spain,  as  is  well  observed  by  Comte,1 
the  impulse  towards  social  change  took  principally  the  direc- 
tion of  economic  reform,  because  the  pressure  exercised  by 
Governments  prevented  so  large  a  measure  of  free  speculation 
in  the  fields  of  philosophy  and  general  politics  as  was  possible 
in  France.  In  Italy,  it  may  be  added,  the  traditions  of  the 
great  industrial  past  of  the  northern  cities  of  that  country 
also  tended  to  fix  attention  chiefly  on  the  economic  side  of 
public  policy  and  legislation. 


GERMANY. 

We  have  seen  that  in  Italy  and  England  political  economy 
had  its  beginnings  in  the  study  of  practical  questions  relating 
chiefly  to  money  or  to  foreign  commerce.  In  Germany  it 
arose  (as  Eoscher  has  shown)  out  of  the  so-called  cameralistic 
sciences.  Soon  after  the  close  of  the  Middle  Ages  there  existed 
in  most  German  countries  a  council,  known  as  the  Kammer 
(Lat.  camera),  which  was  occupied  with  the  management  of 
the  public  domain  and  the  guardianship  of  regal  rights.  The 
Kmperor  Maximilian  found  this  institution  existing  in  Bur- 
gundy, and  established,  in  imitation  of  it,  aulic  councils  at 
Innspruck  and  Vienna  in  1498  and  1501.  Not  only  finance 
and  taxation,  but  questions  also  of  economic  police,  came  to 
be  entrusted  to  these  bodies.  A  special  preparation  became 
necessary  for  their  members,  and  chairs  of  cameralistic  science 

1  Philosophic  Positive,  voL  v.  p.  759. 


8o  POLITICAL  ECONOMY. 

were  founded  in  universities  for  the  teaching  of  \\\e  appro- 
priate body  of  doctrine.  One  side  of  the  instruction  thus 
given  borrowed  its  materials  from  the  sciences  of  external 
nature,  dealing,  as  it  did,  with  forestry,  mining,  general 
technology,  and  the  like ;  the  other  related  to  the  conditions 
of  national  prosperity  as  depending  on  human  relations  and 
institutions ;  and  out  of  the  latter,  German  political  economy 
was  at  first  developed. 

In  no  country  had  mercantilist  views  a  stronger  hold  than 
in  Germany,  though  in  none,  in  the  period  we  are  now  con- 
sidering, did  the  system  of  the  balance  of  trade  receive  a  less 
extensive  practical  application.  All  the  leading  German 
economists  of  the  seventeenth  century  —  Bornitz,  Besold, 
Klock,  Becher,  Horneck,  Seckendorf,  and  Schroder — stand  on 
the  common  basis  of  the  mercantile  doctrine.  And  the  same 
may  be  said  of  the  writers  of  the  first  half  of  the  eighteenth 
century  in  general,  and  notably  of  Justi  (d.  1771),  who  was 
the  author  of  the  first  systematic  German  treatise  on  political 
economy,  a  work  which,  from  its  currency  as  a  text  book,  had 
much  effect  on  the  formation  of  opinion.  Only  in  Zincke 
(1692-1769)  do  we  find  occasional  expressions  of  a  circle  of 
ideas  at  variance  with  the  dominant  system,  and  pointing  in 
the  direction  of  industrial  freedom.  But  these  writers,  except 
from  the  national  point  of  view,  are  unimportant,  not  having 
exercised  any  influence  on  the  general  movement  of  European 
thought. 

The  principles  of  the  physiocratic  system  met  with  a 
certain  amount  of  favour  in  Germany.  Karl  Friedrich,  Mar- 
grave of  Baden,  wrote  for  the  use  of  his  sons  an  Abrege  de» 
principes  d' Economic  Politique,  1772,  which  is  in  harmony 
with  the  doctrines  of  that  system.  It  possesses,  however, 
little  scientific  value.  Schlettwein  (i  731— 1802)  and  Mauvillon 
(1743-1794)  were  followers  of  the  same  school.  Theodor 
Schmalz  (1764-1831),  who  is  commonly  named  as  "the  last 
of  the  physiocrats,"  may  be  here  mentioned,  though  somewhat 
out  of  the  historic  order.  He  compares  Colbertism  with  the 


SYSTEM  OF  NATURAL  LIBERTY.  Si 

Ptolemaic  system,  physiocratism  with  the  Copernican.  Adam 
Smith  he  represents  as  the  Tycho  Brahe  of  political  economy, 
— a  man  of  eminent  powers,  who  could  not  resist  the  force 
of  truth  in  the  physiocrats,  but  partly  could  not  divest  himself 
of  rooted  prejudices,  and  partly  was  ambitious  of  the  fame 
of  a  discoverer  and  a  reconciler  of  divergent  systems.  Though 
Smith  was  now  "the  fashion,"  Schmalz  could  not  doubt  that 
Quesnay's  doctrine  was  alone  tr.ue,  and  would  ere  long  be 
triumphant  everywhere. 

Just  before  the  appearance  of  Smith,  as  in  England  Steuart, 
and  in  Italy  Genovesi,  so  in  Austria  Sonnenfels  (1733—1817), 
the  first  distinguished  economist  of  that  country,  sought  to 
present  the  mercantile  system  in  a  modified  and  more  enlight- 
ened form ;  and  his  work  (Grundsdtze  der  Polizei,  Handlung, 
und  Finanz,  1765  ;  8th  ed.,  1822),  exercised  even  during  a 
considerable  part  of  the  present  century  much  influence  on 
opinion  and  on  policy  in  Austria. 

But  the  greatest  German  economist  of  the  eighteenth  cen- 
tury was,  in  Reseller's  opinion,  Justus  Mb'ser  (1720-1794),  the 
author  of  Patriotische  Phantasieen  (17  74),  a  series  of  fragments, 
which,  Goethe  nevertheless  declares,  form  "ein  wahrhaftes 
Ganzes."  The  poet  was  much  influenced  by  Mbser  in  his 
youth,  and  has  eulogised  in  the  Dichtung  und  Wahrheit  (Bk. 
xiii.)  his  spirit,  intellect,  and  character,  and  his  thorough  in- 
sight into  all  that  goes  on  in  the  social  world.  Whilst  others 
occupied  themselves  with  larger  and  more  .prominent  public 
affairs  and  transactions,  Mb'ser  observed  and  reproduced  the 
common  daily  life  of  his  nation,  and  the  thousand  "little 
things  "  which  compose  the  texture  of  popular  existence.  He 
has  been  compared  to  Franklin  for  the  homeliness,  verve, 
and  freshness  of  his  writings.  In  opinions  he  is  akin  to 
the  Italian  Ortes.  He  is  opposed  to  the  whole  spirit  of  the 
"  Aufklarung,"  and  to  the  liberal  and  rationalistic  direction 
of  which  Smith's  work  became  afterwards  the  expression.  He 
IB  not  merely  conservative  but  reactionary,  manifesting  a 
preference  for  mediaeval  institutions  such  as  the  trade  guilds, 

w 


82  POLITICAL  ECONOMY. 

and,  like  Carlyle  in  our  own  time,  seeing  advantages  even  in 
serfdom,  when  compared  with  the  sort  of  freedom  enjoyed 
by  the  modern  drudge.  He  has  a  marked  antipathy  for  the 
growth,  of  the  money  power  and  of  manufactures  on  the  large 
scale,  and  for  the  highly  developed  division  of  labour.  He  is 
opposed  to  absolute  private  property  in  land,  and  would  gladly 
see  revived  such  a  system  of  restrictions  as  in  the  interest 
of  the  state,  the  commune,  and  the  family  were  imposed  on 
mediaeval  ownership.  In  his  wayward  and  caustic  style,  he 
often  criticises  effectively  the  doctrinaire  narrowness  of  his 
contemporaries,  throws  out  many  striking  ideas,  and  in  parti- 
cular sheds  real  light  on  the  economic  phenomena  and  general 
social  conditions  of  the  Middle  Agea 

ADAM  SMITH,  WITH  HIS  IMMEDIATE  PREDECESSORS 
AND  HIS  FOLLOWERS. 

England. 

The  stagnation  in  economic  inquiry  which  showed  itself  in 
England  in  the  early  part  of  the  eighteenth  century  was  not 
broken  by  any  notable  manifestation  before  1735,  when  Bishop 
Berkeley  put  forward  in  his  Querist,  with  much  force  and 
point,  views  opposed  to  those  of  the  mercantile  school  on 
the  nature  of  national  wealth  and  the  functions  of  money, 
though  not  without  an  admixture  of  grave  error.  But  soon 
a  more  decisive  advance  was  made.  Whilst  in  France^  the 
physiocrats  were  working  after  their  own  fashion  towards  the 
construction  of  a  definitive  system  of  political  economy,  a 
Scottish  thinker  of  the  first  order  was  elucidating,  in  a  series 
of  short  but  pregnant  essays,  some  of  the  fundamental  con- 
ceptions of  the  science.  What  had  been  written  on  these 
questions  in  the  English  language  before  his  time  had  remained 
almost  altogether  within  the  limits  of  the  directly  practical 
sphere.  With  Locke,  indeed,  the  general  system  of  the  modern 
critical  philosophy  had  come  into  relation  with  economic 
inquiry,  but  only  in  a  partial  and  indeterminate  way.  But 


SYSTEM  OF  NATURAL  LIBERTY.  83 

in  Hume  the  most  advanced  form  of  this  philosophy  was 
represented,  and  his  appearance  in  the  field  of  economics 
decisively  marks  the  tendency  of  the  latter  order  of  specula- 
tion to  place  itself  in  connection  with  the  largest  and  deepest 
thought  on  human  nature  and  general  human  history.  Most 
of  the  essays  here  referred  to  first  appeared  in  1752,  in  a 
volume  entitled  Political  Discourses,  and  the  numher  was 
completed  in  the  collection  of  Essays  and  Treatises  on  Several 
Subjects,  published  in  the  following  year.  The  most  important 
of  them  are  those  on  Commerce,  on  Money,  on  Interest,  and 
on  the  Balance  of  Trade.  Yet  these  should  not  be  separated 
from  the  rest,  for,  notwithstanding  the  unconnected  form  of 
these  little  treatises,  there  runs  through  them  a  profound 
unity  of  thought,  so  that  they  indeed  compose  in  a  certain 
sense  an  economic  system.  They  exhibit  in  full  measure 
Hume's  wonderful  acuteness  and  subtlety,  which  indeed  some- 
times dispose  him  to  paradox,  in  combination  with  the  breadth, 
the  absence  of  prejudice,  and  the  social  sympathies  which  so 
eminently  distinguish  him ;  and  they  offer,  besides,  the  charm 
of  his  easy  and  natural  style  and  his  rare  power  of  lucid 
exposition. 

In  the  essay  on  money  he  refutes  the  mercantilist  error, 
which  tended  to  confound  it  with  wealth.      "Men  and  com- 
modities," he  says,  "are  the  real  strength  of  any  community." 
"  In  the  national  stock  of  labour  consists  all  real  power  and 
riches."     Money  is  only  the  oil  which  makes  the  movements 
of  the  mechanism^  of  commerce  more  smooth  and  easy.     He  *\ 
shows    that,   from    the    domestic    as   distinguished    from  the    I 
international  point  of  view,  the  absolute  quantity  of  money,   / 
supposed  as  of  fixed  amount,  in  a  country  is  of  no  consequence,   \ 
whilst  an  excessive  quantity,  larger,  that  is,  than  is  required    [ 
for  the  interchange  of  commodities,  may  be  injurious  as  raising  j 
prices  and  driving  foreigners  from  the  home  markets.     He 
goes  so  far,  in  one  or  two  places,  as  to  assert  that  the  value  of 
money  is  chiefly  fictitious  or  conventional,  a  position  which 
cannot  be  defended ;  but  it  must  not  be  pressed  against  him, 


84  POLITICAL  ECONOMY. 

as  he  builds  nothing  on  it.  He  lias  some  very  ingenious 
observations  (since,  however,  questioned  by  J.  S.  Mill)  on  the 
effects  of  the  increase  of  money  in  a  country  in  stimulating 
industry  during  the  interval  which  takes  place  before  the 
additional  amount  is  sufficiently  diffused  to  alter  the  whole 
scale  of  prices.  He  shows  that  the  fear  of  the  money  of  an 
industrious  community  being  lost  to  it  by  passing  into  foreign 
countries  is  groundless,  and  that,  under  a  system  of  freedom, 
the  distribution  of  the  precious  metals  which  is  adapted  to  the 
requirements  of  trade  will  spontaneously  establish  itself.  "  In 
short,  a  Government  has  great  reason  to  preserve  with  care  its 
people  and  its  manufactures ;  its  money  it  may  safely  trust  to 
the  course  of  human  affairs  without  fear  or  jealousy." 

A  very  important  service  was  rendered  by  his  treatment 
of  the  rate  of  interest.  He  exposes  the  erroneous  idea  often 
entertained  that  it  depends  on  the  quantity  of  money  in  a 
country,  and  shows  that  the  reduction  of  it  must  in  general 
be  the  result  of  "  the  increase  of  industry  and  frugality,  of 
arts  and  commerce,"  so  that  it  may  serve  as  a  barometer,  its 
lowness  being  an  almost  infallible  sign  of  the  flourishing 
condition  of  a  people.  It  may  be  observed  in  passing  that  in 
the  essay  devoted  to  this  subject  he  brings  out  a  principle 
of  human  nature  which  economists  too  often  overlook,  "  the 
constant  and  insatiable  desire  of  the  mind  for  exercise  and 
employment,"  and  the  consequent  action  of  ennui  in  prompting 
to  exertion. 

With  respect  to  commerce,  he  points  to  its  natural  founda- 
tion in  what  has  since  been  called  "  the  territorial  division  of 
labour,"  and  proves  that  the  prosperity  of  one  nation,  instead 
of  being  a  hindrance,  is  a  help  to  that  of  its  neighbours. 
''Not  only  as  a  man,  but  as  a  British  subject,"  he  says,  "I 
pray  for  the  flourishing  commerce  of  Germany,  Spain,  Italy, 
and  even  France  itself."  He  condemns  the  "numberless  bars, 
obstructions,  and  imposts  which  all  nations  of  Europe,  and 
none  more  than  England,  have  put  upon  trade."  Yet  on  the 
question  of  protection  to  national  industry  he  is  not  quite  at 


SYSTEM  OF  NATURAL  LIBERTY.  85 

the  free-trade   point  of  view,  for  he  approves  of  a  tax  on 
German  linen  as  encouraging   home  manufactures)  and  of  a. 

tax  on  brandy  as  increasing  the  sale  of  rurn  and  supporting 
our  southern  colonies.     Indeed  it   has  been  justly  observed  A 
that  there  are  in  him  several  traces  of  a  refined  mercantilism,  [ 
and  that  he  represents  a  state  of  opinion  in  which  the  transi-  V 
tion  from  the  old  to  the  new  views  is  not  yet  completely  j 
effected. 

We  cannot  do  more  than  refer  to  the  essay  on  taxes,  in 
which,  amongst  other  things,  he  repudiates  the  imp&t  unique 
of  the  physiocrats,  and  to  that  on  public  credit,  in  which  he 
criticises  the  "new  paradox  that  public  encumbrances  are 
of  themselves  advantageous,  independent  of  the  necessity  of 
contracting  them,"  and  objects,  perhaps  too  absolutely,  to  the 
modern  expedient  of  raising  the  money  required  for  national 
enterprises  by  way  of  loan,  and  so  shifting  our  burdens  upon 
the  shoulders  of  posterity. 

Tlu>  characteristics  of  Hume,  which  are  most  important  in 
the  history  of  economic  investigation,  are  (i)  his  practice  of 
bringing  economic  facts  into  connection  with  all  the  weighty 
interests  of  social  and  political  life,  and  (2)  his  tendency  to 
introduce  the  historical  spirit  into  the  study  of  those  facts. 
He  admirably  illustrates  the  mutual  action  of  the  several 
branches  of  industry,  and  the  influences  of  progress  in  the 
arts  of  production  and  in  commerce  on  general  civilisation, 
exhibits  the  striking  contrasts  of  the  ancient  and  modern 
system  of  life  (see  especially  the  essay  On  the  Populousness 
of  Ancient  Nations),  and  considers  almost  every  phenomenon 
which  comes  under  discussion  in  its  relations  to  the  con- 
temporary stage  of  social  development.  It  cannot  be  doubted 
that  Hume  exercised  a  most  important  influence  on  Adam 
Smith,  who  in  the  Wealth  of  Nations  calls  him  "  by  far  the 
most  illustrious  philosopher  and  historian  of  the  present  age," 
and  who  esteemed  his  character  so  highly  that,  after  a  friend- 
ship of  many  years  had  been  terminated  by  Hume's  decease, 
he  declared  him  to  have  "approached  as  nearly  to  the  ideal 


86  POLITICAL  ECONOMY. 

of  a  perfectly  wise  and  virtuous  man  as  perhaps  the  nature  of 
human  frailty  will  permit." 

Josiah  Tucker,  dt-fr  of  Gloucester  (d.  1799),  holds  a  dis- 
tinguished place  among  the  immediate  predecessors  of  Smith. 
Most  of  his  numerous  productions  had  direct  reference  to 
contemporary  questions,  and,  though  marked  by  much  sagacity 
and  penetration,  are  deficient  in  permanent  interest.  In  some 
of  these  he  urged  the  impolicy  of  restrictions  on  the  trade 
of  Ireland,  advocated  a  union  of  that  country  with  England, 
and  recommended  the  recognition  of  the  independence  of  the 
United  States  of  America.  The  most  important  of  his  general 
economic  views  are  those  relating  to  international  commerce. 
He  is  an  ardent  supporter  of  free-trade  doctrines,  which  he 
bases  on  the  principles  that  there  is  between  nations  no 
necessary  antagonism,  but  rather  a  harmony,  of  interests,  and 
that  their  several  local  advantages  and  different  aptitudes 
naturally  prompt  them  to  exchange.  He  had  not,  however, 
got  quite  clear  of  mercantilism,  and  favoured  bounties  on  ex- 
ported manufactures  and  the  encouragement  of  population  by 
a  tax  on  celibacy.  Dupont,  and  after  him  Blanqui,  represent 
Tucker  as  a  follower  of  the  physiocrats,  but  there  seems  to  be 
no  ground  for  this  opinion  except  his  agreement  with  them 
on  the  subject  of  the  freedom  of  trade.  Turgot  translated 
into  French  (1755),  under  the  title  of  Questions  Importantes 
sur  le  Commerce,  a  tract  by  Tucker  on  The  Expediency  of  a 
Law  for  the  Naturalisation  of  Foreign  Protestants. 

In  1767  was  published  Sir  James  Steuart's  Inquiry  into  the 
Principles  of  Political  Economy.  This  was  one  of  the  most 
unfortunate  of  books.  It  was  the  most  complete  and  syste- 
matic survey  of  the  science  from  the  point  of  view  of  moderate 
mercantilism  which  had  appeared  in  England.  Steuart  was 
a  man  of  no  ordinary  abilities,  and  had  prepared  himself  for 
his  task  by  long  and  serious  study.  But  the  time  for  the 
mercantile  doctrines  was  past,  and  the  system  of  natural 
liberty  was  in  possession  of  an  intellectual  ascendency  which 
foreshadowed  its  political  triumph.  Nine  years  later  the 


SYSTEM  OF  NATURAL  LIBERTY.  87 

Wealth  of  Nations  was  given  to  the  world,  a  work  as  superior 
to  Steuart's  in  attractiveness  of  style  as  in  scientific  soundness. 
Thus  the  latter  was  predestined  to  fail,  and  in  fact  never 
exercised  any  considerable  theoretic  or  practical  influence. 
Smith  never  quotes  or  mentions  it ;  being  acquainted  with 
Steuart,  whose  conversation  he  said  was  better  than  his  book, 
he  probably  wished  to  keep  clear  of  controversy  with  him.1 
The  German  economists  have  examined  Steuart's  treatise 
more  carefully  than  English  writers  have  commonly  done ; 
and  they  recognise  its  high  merits,  especially  in  relation  to  the 
theory  of  value  and  the  subject  of  population.  They  have 
also  pointed  out  that,  in  the  spirit  of  the  best  recent  research, 
he  has  dwelt  on  the  special  characters  which  distinguish  the 
economies  proper  to  different  nations  and  different  grades  in 
social  progress. 

Coming  now  to  the  great  name  of  Adam  Smith  (1723-1 790), 
it  is  of  the  highest  importance  that  we  should  rightly  under- 
stand his  position  and  justly  estimate  his  claims.  It  is  plainly 
contrary  to  fact  to  represent  him,  as  some  have  done,  as  the 
creator  of  political  economy.  The  subject  of  social  wealth 
"had  always  in  some  degree,  and  increasingly  in  recent  times, 
engaged  the  attention  of  philosophic  minds.  The  study  had 
even  indisputably  assumed  a  systematic  character,  and,  from 
being  an  assemblage  of  fragmentary  disquisitions  on  particular 
questions  of  national  interest,  had  taken  the  form,  notably 
in  Turgot's  Reflexions,  of  an  organised  body  of  doctrine.  The 
truth  is,  that  Smith  took  up  the  science  when  it  was  already 
considerably  advanced;  and  it  was  this  very  circumstance 
which  enabled  him,  by  the  production  of  a  classical  treatise, 
to  render  most  of  his  predecessors  obsolete.  But,  whilst  all 
the  economic  labours  of  the  preceding  centuries  prepared  the 
Way  for  him,  they  did  not  anticipate  his  work.  His  appear- 

1  Smith  says,  in  a  letter  to  Pulteney  ( 1772) — "  I  have  the  same  opinion 
of  Sir  James  Stewart's  book  that  you  have.  Without  once  mentioning 
it,  I  natter  myself  that  any  false  principle  in  it  will  meet  with  a  clear 
and  distinct  confutation  in  mine." 


88  POLITICAL  ECONOMY. 

ance  at  an  earlier  stagb,  :>r  without  those  previous 
would  be  inconceivable ;  but  he  built,  on  the  foundation 
which  had  been  laid  by  others,  much  of  his  own  that  was 
precious  and  enduring. 

Even  those  who  do  not  fall  into  the  error  of  making  Smith 
the  creator  of  the  science,  often  separate  him  too  broadly  from 
Quesnay  and  his  followers,  and  represent  the  history  of  modern 
Economics  as  consisting  of  the  successive  rise  and  reign  of 
three  doctrines — the  mercantile,  the  physiocratic,  and  the 
Smithian.  The  last  two  are,  it  is  true,  at  variance  in  some 
even  important  respects.  But  it  is  evident,  and  Smith  him- 
self felt,  that  their  agreements  were  much  more  fundamental 
than  their  differences ;  and,  if  we  regard  them  as  historical 
forces,  they  must  be  considered  as  working  towards  identical 
ends.  They  both  urged  society  towards  the  abolition  of  the 
previously  prevailing  industrial  policy  of  European  Govern- 
ments ;  and  their  arguments  against  that  policy  rested  essenti- 
ally on  the  same  grounds.  Whilst  Smith's  criticism  was  more 
searching  and  complete,  he  also  analysed  more  correctly  than 
the  physiocrats  some  classes  of  economic  phenomena, — in  par- 
ticular dispelling  the  illusions  into  which  they  had  fallen 
with  respect  to  the  unproductive  nature  of  manufactures  and 
commerce.  Their  school  disappeared  from  the  scientific  field, 
not  merely  because  it  met  with  a  political  check  in  the  person 
of  Turgot,  but  because,  as  we  have  already  said,  the  Wealth 
of  Nations  absorbed  into  itself  all  that  was  valuable  in  their 
teaching,  whilst  it  continued  more  effectually  the  impulse 
they  had  given  to  the  necessary  work  of  demolition. 

The  history  of  economic  opinion  in  modern  times,  down 
io  the  third  decade  of  our  own  century,  is,  in  fact,  strictly 
bipartite.  The  first  stage  is  filled  with  the  mercantile  system, 
•which,  as  we  have  shown,  was  rather  a  practical  policy  than  a 
speculative  doctrine,  and  which  came  into  existence  as  the 
spontaneous  growth  of  social  conditions  acting  on  minds  not 
trained  to  scientific  habits.  The  second  stage  is  occupied 
with  the  gradual  rise  and  ultimate  ascendency  of  anothei 


SYSTEM  OF  NATURAL  LIBERTY.  89 

system  founded  on  the  idea  of  the  right  of  the  individual  to 
an  unimpeded  sphere  for  the  exercise  of  his  economic  activity. 
"With  the  latter,  which  is  best  designated  as  the  "  system  of 
natural  liberty,"  we  ought  to  associate  the  memory  of  the 
physiocrats  as  well  as  that  of  Smith,  without,  however,  main 
taining  their  services  to  have  been  equal  to  his. 

The  teaching  of  political  economy  was  in  the  Scottish  uni-N 
versities  associated  with  that  of  moral  philosophy.  Smith,  as 
we  are  told,  conceived  the  entire  subject  he  had  to  treat  in 
his  public  lectures  as  divisible  into  four  heads,  the  first  of 
which  was  natural  theology,  the  second  ^thics.  the  third 
jurisprudence ;  whilst  in  the  fourth  "he  examined  those  poli- 

^^^^••£^MMM^^^B»  A 

tical  regulations  which  are  founded  upon  expediency,  and 
which  are  calculated  to  increase  the  riches,  the  power,  and  the 
p^rosperity  of  a  state."  The  last  two  branches  of  inquiry  are 
regarded  as  forming  but  a  single  body  of  doctrine  in  the  well- 
known  passage  of  the  Theory  of  Moral  Sentiments  in  which 
the  author  promises  to  give  in  another  discourse  "  an  account 
of  the  general  principles  of  law  and  government,  and  of  the 
different  revolutions  they  have  undergone  in  the  different  ages 
and  periods  of  society,  not  only  in  what  concerns  justice,  but 
in  what  concerns  police,  revenue,  and  arms,  and  whatever  else 
is  the  subject  of  law."  This  shows  how  little  it  was  Smith's 
habit  to  separate  (except  provisionally),  in  his  conceptions 
or  his  researches',  the  economic  phenomena  of  society  from 
all  the  rest.  The  words  above  quoted  have,  indeed,  been  not 
unjustly  described  as  containing  "  an  anticipation,  wonderful 
for  his  period,  of  general  Sociology,  both  statical  and  dynami- 
cal, an  anticipation  which  becomes  still  more  remarkable  when 
we  learn  from  his  literary  executors  that  he  had  formed  the 
plan  of  a  connected  history  of  the  liberal  sciences  and  elegant 
arts,  which  must  have  added  to  the  branches  of  social  study 
already  enumerated  a  view  of  the  intellectual  progress  of 
society."  Though  these  large  designs  were  never  carried  out 
in  their  integrity,  as  indeed  at  that  period  they  could  not  have 
been  adequately  realised,  it  has  resulted  from  them  th*it,  though 


90  POLITICAL  ECONOMY. 

economic  phenomena  form  the  special  subject  of  the  Wealth 
of  Nations,  Smith  yet  incorporated  into  that  work  much  that 
relates  to  the  other  social  aspects,  incurring  thereby  the  censure 
of  some  of  his  followers,  who  insist  with  pedantic  narrowness 
on  the  strict  isolation  of  the  economic  domain. 

There  has  been  much  discussion  on  the  question — What  is 
the  scientific  method  followed  by  Smith  in  his  great  work  I 
y  By  some  it  is  considered  to  have  been  purely  deductive,  a 
view  which  Buckle  has  perhaps  carried  to  the  greatest  ex- 
treme. He  asserts  that  in  Scotland  the  inductive  method 
was  unknown,  that  the  inductive  philosophy  exercised  no 
influence  on  Scottish  thinkers ;  and,  though  Smith  spent 
some  of  the  most  important  years  of  his  youth  in  England, 
where  the  inductive  method  was  supreme,  and  though  he  was 
widely  read  in  general  philosophical  literature,  he  yet  thinks 
he  adopted  the  deductive  method  because  it  was  habitually 
followed  in  Scotland, — and  this  though  Buckle  maintains 
that  it  is  the  only  appropriate,  or  even  possible,  method  in 
political  economy,  which  surely  would  have  been  a  sufficient 
reason  for  choosing  it.  That  the  inductive  spirit  exercised 
no  influence  on  Scottish  philosophers  is  certainly  not  true ; 
as  will  be  presently  shown,  Montesquieu,  whose  method  is 
essentially  inductive,  was  in  Smith's  time  studied  with  quite 
peculiar  care  and  regarded  with  special  veneration  by  Smith's 
^fellow-countrymen.  As  to  Smith  himself,  what  may  justly 
be  said  of  him  is  that  the  deductive  bent  was  certainly  not 
the  predominant  character  of  his  mind,  nor  did  his  great 
excellence  lie  in  the  "dialectic  skill  "which  Buckle  ascribes 
to  him.  "What  strikes  us  most  in  his  book  is  his  wide  and 
keen  observation  of  social  facts,  and  his  perpetual  tendency 
to  dwell  on  these  and  elicit  their  significance,  instead  of 
drawing  conclusions  from  abstract  principles  by  elaborate 
chains  of  reasoning.  It  is  this  habit  of  his  mind  which 
gives  us,  in  reading  him,  so  strong  and  abiding  a  sense  of 
being  in  contact  with  the  realities  of  life. 

That  Smith  does,  however,  largely  employ  the  deductive 

- 


SYSTEM  OF  NATURAL  LIBERTY.  91 

method  is  certain  ;  and  that  method  is  quite  legitimate  when 
the  premises  from  which  the  deduction  sets  out  are  known 
universal  facts  of  human  nature  and  properties  of  external 
objects.  Whether  this  mode  of  proceeding  will  carry  us  far 
may  indeed  well  be  doubted ;  but  its  soundness  cannot  be 
disputed.  But  there  is  another  vicious  species  of  deduction 
which,  as  Cliffe  Leslie  has  shown,  seriously  tainted  the 
philosophy  of  Smith, — in  which  the  premises  are  not  facts 
ascertained  by  observation,  but  the  same  a  priori  assumptions, 
half  theological  half  metaphysical,  respecting  a  supposed 
harmonious  and  beneficent  natural  order  of  things  which 
we  found  in  the  physiocrats,  and  which,  as  we  saw,  were 
embodied  in  the  name  of  that  sect.  In  his  view,  Nature  has 
made  provision  for  social  wellbeing  by  the  principle  of  the 
human  constitution  which  prompts  every  man  to  better  his 
condition :  the  individual  aims  only  at  his  private  gain,  but 
in  doing  so  is  "  led  by  an  invisible  hand  "  to  promote  the 
public  good,  which  was  no  part  of  his  intention ;  human 
institutions,  by  interfering  with  the  action  of  this  principle 
in  the  name  of  the  public  interest,  defeat  their  own  end  ;  but, 
when  all  systems  of  preference  or  restraint  are  taken  away, 
"  the  obvious  and  simple  system  of  natural  liberty  establishes 
itself  of  its  own  accord."  This  theory  is,  of  course,  not 
explicitly  presented  by  Smith  as  a  foundation  of  his  econo- 
mic  doctrines,  but  it  is  really  the  secret  substratum  on  which 
they  rest.  Yet,  whilst  such  latent  postulates  warped  his 
view  of  things,  they  did  not  entirely  determine  his  method. 
His  native  bent  towards  the  study  of  things  as  they  are  pre- 
served him  from  extravagances  into  which  many  of  his  fol- 
lowers have  fallen.  But  besides  this,  as  Leslie  has  pointed 
out,  the  influence  of  Montesquieu  tended  to  counterbalance 
the  theoretic  prepossessions  produced  by  the  doctrine  of  the 
jus  naturce.  That  great  thinker,  though  he  could  not,  at  his 
period,  understand  the  historical  method  which  is  truly  ap- 
propriate to  sociological  inquiry,  yet  founded  his  conclusions 
on  induction.  It  is  true,  as  Comte  has  remarked,  that  hit 


92  POLITICAL  ECONOMY. 

accumulation  of  facts,  borrowed  from  the  most  different 
states  of  civilisation,  and  not  subjected  to  philosophic  criti- 
cism, necessarily  remained  on  the  whole  sterile,  or  at  least 
could  not  essentially  advance  the  study  of  society  much 
beyond  the  point  at  which  he  found  it.  His  merit,  as  we 
have  before  mentioned,  lay  in  the  recognition  of  the  subjection 
of  all  social  phenomena  to  natural  laws,  not  in  the  discovery 
of  those  laws.  But  this  limitation  was  overlooked  by  the 
philosophers  of  the  time  of  Smith,  who  were  much  attracted 
by  the  system  he  followed  of  tracing  social  facts  to  the  special 
circumstances,  physical  or  moral,  of  the  communities  in  which 
they  were  observed.  Leslie  has  shown  that  Lord  Kaimes, 
Dalrymple,  and  Millar — contemporaries  of  Smith,  and  the 
last  his  pupil — were  influenced  by  Montesquieu ;  and  he 
might  have  added  the  more  eminent  name  of  Ferguson,  whose 
respect  and  admiration  for  the  great  Frenchman  are  expressed 
in  striking  terms  in  his  History  of  Civil  Society,1  We  are 
even  informed  that  Smith  himself  in  his  later  years  was 
occupied  in  preparing  a  commentary  on  the  Esprit  des  Lois.2 

1  "  When  I  recollect  what  the  President  Montesquieu  has  written,  I 
am  at  a  loss  to  tell  why  I  should  treat  of  human  affairs ;  but  I  too  am 
instigated  by  my  reflections  and  my  sentiments  ;  and  I  may  utter  them 
more  to  the  comprehension  of  ordinary  capacities,  because  I  am  more 
on  the  level  of  ordinary  men.  .  .  .  The  reader  should  be  referred  to  what 
has  been  already  delivered  on  the  subject  by  this  profound  politician  and 
amiable  moralist "  (Part  I.  sect.  10).     Hume  speaks  of  Montesquieu  as 
an  "illustrious  writer,"  who  "has  established  ...  a  system  of  political 
knowledge,  which  abounds  in  ingenious  and  brilliant  thoughts  and  is  not 
wanting  in  solidity  "  (Principles  of  Morals,  sect.  3,  and  note). 

2  The  following  paragraph  appeared   in   the   Moniteur   Universel  of 
March    II,   1790: — "On  pretend   que  le  celebre  M.    Smith,    connu   si 
avantageusement  par  son  traite'  des  causes  de  la  richesse  des  nations, 
prepare  et  va  mettre  a  1'impression  un  examen  critique  de  1'Esprit  des 
Lois  ;  c'est  le  re'sultat  de  plusieurs  anne'es  de  meditation,  et  Ton  sait 
assez  ce  qu'on  a  droit  d'attenclre  d'une  tete  comme  celle  de  M.  Smith. 
Ce  livre  fera  e'poque  dans  1'histoire  de  la  politique  et  de  la  philosophic  , 
tel  est  du  moins  le  jugement  qu'en  portent  des  gens  instruits  qui  en 
connaissent  des  fragments  dont  ils  ne  parlent  qu'avec  an  enthousiagma 
du  plus  heureux  augure." 


SYSTEM  OF  NATURAL  LIBERTY.  93 

He  was  thus  affected  by  two  different  and  incongruous  systems 
of  thought, — one  setting  out  from  an  imaginary  code  of  nature 
intended  for  the  benefit  of  man,  and  leading  to  an  optimistic 
view  of  the  economic  constitution  founded  on  enlightened  self- 
interest  ;  the  other  following  inductive  processes,  and  seeking 
to  explain  the  several  states  in  which  human  societies  are 
found  existing,  as  results  of  circumstances  or  institutions 
which  have  been  in  actual  operation.  And  we  find  accordingly 
in  his  great  work  a  combination  of  these  two  modes  of  treat- 
ment— inductive  inquiry  on  the  one  hand,  and,  on  the  other, 
a  priori  speculation  founded  on  the  "Mature"  hypothesis. 
The  latter  vicious  proceeding  has  in  some  of  his  followers 
been  greatly  aggravated,  while  the  countervailing  spirit  of 
inductive  investigation  has  fallen  into  the  background,  and 
indeed  the  necessity  or  utility  of  any  such  investigation  in 
the  economic  field  has  been  sometimes  altogether  denied. 

Some  have  represented  Smith's  work  as  of  so  loose  a 
texture  and  so  defective  in  arrangement  that  it  may  be  justly 
described  as  consisting  of  a  series  of  monographs.  But  this 
is  certainly  an  exaggeration.  The  book,  it  is  true,  is  not 
framed  on  a  rigid  mould,  nor  is  there  any  parade  of  systematic 
divisions  and  subdivisions ;  and  this  doubtless  recommended 
it  to  men  of  the  world  and  of  business,  for  whose  instruction 
it  was,  at  least  primarily,  intended.  But,  as  a  body  of  exposi- 
tion, it  has  the  real  and  pervading  unity  which  results  from 
a  mode  of  thinking  homogeneous  throughout  and  the  general 
absence  of  such  contradictions  as  would  arise  from  an  imper- 
fect digestion  of  the  subject. 

Smith  sets  out  from  the  thought  that  the  annual  labour  of 
a  nation  is  the  source  from  which  it  derives  its  supply  of  the 
necessaries  and  conveniences  of  life.  He  does  not  of  course 
contemplate  labour  as  the  only  factor  in  production ;  but  it 
has  been  supposed  that  by  emphasising  it  at  the  outset  he  at 
once  otrikes  the  note  of  difference  between  himself  on  the  one 
hand  and  both  the  mercantilists  and  the  physiocrats  on  the 
other.  The  improvement  in  the  productiveness  of  laboui 


94  POLITICAL  ECONOMY. 

depends  largely  on  its  division ;  and  he  proceeds  accordingly 
/  to  give  his  unrivalled  exposition  of  that  principle,  of  the 
grounds  on  which  it  rests,  and  of  its  greater  applicability  to 
manufactures  than  to  agriculture,  in  consequence  of  which  the 
latter  relatively  Jags  behind  in  the  course  of  economic  develop- 
ment.1  The  origin  of  the  division  of  labour  he  finds  in  the 
propensity  of  human  nature  "  to  truck,  barter,  or  exchange 
one  thing  for  another."  He  shows  that  a  certain  accumulation 
of  capital  is  a  condition  precedent  of  this  division,  and  that 
the  degree  to  which  it  can  be  carried  is  dependent  on  the 
extent  of  the  market  When  the  division  of  labour  has  been 
established,  each  member  of  the  society  must  have  recourse 
to  the  others  for  the  supply  of  most  of  his  wants ;  a  medium 
of  exchange  is  thus  found  to  be  necessary,  and  money  comes 
into  use.  The  exchange  of  goods  against  each  other  or  against 
money  gives  rise  to  the  notion  of  value.  This  word  has  two 
meanings — that  of  utility,  and  that  of  purchasing  power ;  the 
one  may  be  called  value  in  use,  the  other  value  in  exchange. 
Merely  mentioning  the  former,  Smith  goes  on  to  study  the 
latter.  What,  he  asks,  is  the  measure  of  value  ?  what  regu- 
lates the  amount  of  one  thing  which  will  be  given  for  another  ? 
"  Labour,"  Smith  answers,  "  is  the  real  measure  of  the  ex- 
changeable value  of  all  commodities."  "  Equal  quantities 
of  labour,  at  all  times  and  places,  are  of  equal  value  to  the 
labourer."  2  "  Labour  alone,  therefore,  never  varying  in  its 
own  value,  is  alone  the  ultimate  and  real  standard  by  which 
the  value  of  all  commodities  can  at  all  times  and  places  be 
estimated  and  compared.  It  is  their  real  price ;  money  is 
their  nominal  price  only."  Money,  however,  is  in  men's 
actual  transactions  the  measure  of  value,  as  well  as  the  vehicle 

1  Smith  takes  no  account  in  this  place  of  the  evils  which  may  arise 
from  a  highly  developed  division  of  labour.     But  see  Bk.  v.  chap.  i. 

2  This  sentence,  which  on  close  examination  will  be  found  to  have  no 
definite  intelligible  sense,  affords  a  good  example  of  the  way  in  which 
metaphysical  modes  of   thought  obscure   economic  ideas.     What  is   a 
"quantity  of  labour,"  the  kind  of  labour  being  undetermined?     And 
what  is  meant  by  the  phrase  "  of  equal  value  "  I 


SYSTEM  OF  NATURAL  LIBERTY.  95 

of  exchange ;  and  the  precious  metals  are  best  suited  for  this 
function,  as  varying  little  in  their  own  value  for  periods  of 
moderate  length ;  for  distant  times,  corn  is  a  better  standard 
of  comparison.  In  relation  to  the  earliest  social  stage,  we 
need  consider  nothing  but  the  amount  of  labour  employed  in 
the  production  of  an  article  as  determining  its  exchange  value  ; 
but  in  more  advanced  periods  price  is  complex,  and  consists 
in  the  most  general  case  of  three  elements — wages,  profit,  and 
rent.  Wages  are  the  reward  of  labour.  Profit  arises  as  soon 
as  stock,  being  accumulated  in  the  hands  of  one  person,  is 
employed  by  him  in  setting  others  to  work,  and  supplying 
them  with  materials  and  subsistence,  in  order  to  make  a  gain 
by  what  they  produce.  Rent  arises  as  soon  as  the  land  of  a 
country  has  all  become  private  property ;  "  the  landlords,  like 
all  other  men,  love  to  reap  where  they  never  sowed,  and  de- 
mand a  rent  even  for  its  natural  produce."  In  every  improved 
society,  then,  these  three  elements  enter  more  or  less  into  the 
price  of  the  far  greater  part  of  commodities.  There  is  in  every 
society  or  neighbourhood  an  ordinary  or  average  rate  of  wages 
and  profit  in  every  different  employment  of  labour  and  stock, 
regulated  by  principles  to  be  explained  hereafter,  as  also  an 
ordinary  or  average  rate  of  rent.  These  may  be  called  the 
natural  rates  at  the  time  when  and  the  place  where  they  pre- 
vail ;  and  the  natural  price  of  a  commodity  is  what  is  sufficient 
to  pay  for  the  rent  of  the  land,1  the  wages  of  the  labour,  and 
the  profit  of  the  stock  necessary  for  bringing  the  commodity 
to  market.  The  market  price  may  rise  above  or  fall  below 
the  amount  so  fixed,  being  determined  by  the  proportion 
between  the  quantity  brought  to  market  and  the  demand  of 
those  who  are  willing  to  pay  the  natural  price.  Towards  the 
natural  price  as  a  centre  the  market  price,  regulated  by  com- 
petition, constantly  gravitates.  Some  commodities,  however, 
are  subject  to  a  monopoly  of  production,  whether  from  the 
peciiliarities  of  a  locality  or  from  legal  privilege :  their  price 

1  Smith's  expressions  on  this  point  are  lax,  as  will  be  seen  when  we 
come  to  examine  the  (so-called)  Ricardian  Theory  of  Bent. 


g6  POLITICAL  ECONOMY. 

is  always  the  highest  that  can  be  got ;  the  natural  price  of 
other  commodities  is  the  lowest  which  can  be  taken  for  any 
length  of  time  together.  The  three  component  parts  or  factors 
of  price  vary  with  the  circumstances  of  the  society.  The  rate 
of  wages  is  determined  by  a  "  dispute  "  or  struggle  of  opposite 
interests  between  the  employer  and  the  workman.  A  minimum 
rate  is  fixed  by  the  condition  that  they  must  be  at  least  suffi- 
cient to  enable  a  man  and  his  wife  to  maintain  themselves 
and,  in  general,  bring  up  a  family.  The  excess  above  this 
will  depend  on  the  circumstances  of  the  country,  and  the  con- 
sequent demand  for  labour, — wages  being  high  when  national 
wealth  is  increasing,  low  when  it  is  declining.  The  same 
circumstances  determine  the  variation  of  profits,  but  in  an 
opposite  direction  ;  the  increase  of  stock,  which  raises  wages, 
tending  to  lower  profit  through  the  mutual  competition  of 
capitalists.  "  The  whole  of  the  advantages  and  disadvantages 
of  the  different  employments  of  labour  and  stock  must,  in  the 
same  neighbourhood,  be  either  perfectly  equal  or  continually 
tending  to  equality ; "  if  one  had  greatly  the  advantage  over 
the  others,  people  would  crowd  into  it,  and  the  level  would 
soon  be  restored.  Yet  pecuniary  wages  and  profits  are  very 
different  in  different  employments, — either  from  certain  cir- 
cumstances affecting  the  employments,  which  recommend  or 
disparage  them  in  men's  notions,  or  from  national  policy, 
"  which  nowhere  leaves  things  at  perfect  liberty."  Hero 
follows  Smith's  admirable  exposition  of  the  causes  which  pro- 
duce the  inequalities  in  wages  and  profits  just  referred  to.  a 
passage  affording  ample  evidence  of  his  habits  of  nice  observa- 
tion of  the  less  obvious  traits  in  human  nature,  and  also  of 
the  operation  both  of  these  and  of  social  institutions  on  eco- 
nomic facts.  The  rent  of  land  conies  next  to  be  considered, 
as  the  last  of  the  three  elements  of  price.  Kent  is  a  mono- 
poly price,  equal,  not  to  what  the  landlord  could  afford  to  take, 
but  to  what  the  farmer  can  afford  to  give.  "  Such  parts  only 
of  the  produce  of  land  can  commonly  be  brought  to  market, 
of  which  the  ordinary  price  is  sufficient  to  replace  the  stock 


SYSTEM  OF  NATURAL  LIBERTY.  97 

which  must  be  employed  in  bringing  them  thither,  togethel 
with  the  ordinary  profits.  If  the  ordinary  price  is  more  tha* 
this,  the  surplus  part  will  naturally  go  to  the  rent  of  the  land. 
If  it  is  not  more,  though  the  commodity  may  be  brought  to 
market,  it  can  afford  no  rent  to  the  landlord.  Whether  the 
price  is  or  is  not  more  depends  on  the  demand."  "Rent, 
therefore,  enters  into  the  price  of  commodities  in  a  different 
way  from  wages  and  profits.  High  or  low  wages  and  profit 
are  the  causes  of  high  or  low  price ;  high  or  low  rent  is  the 
effect  of  it." 

Rent,  wages,  and  profits,  as  they  are  the  elements  of  price, 
are  also  the  constituents  of  income;  and  the  three  great 
orders  of  every  civilised  society,  from  whose  revenues  that  of 
every  other  order  is  ultimately  derived,  are  the  landlords,  the 
labourers,  and  the  capitalists.  The  relation  of  the  interests 
of  these  three  classes  to  those  of  society  at  large  is  different. 
The  interest  of  the  landlord  always  coincides  with  the  general 
interest :  whatever  promotes  or  obstructs  the  one  has  the  same 
effect  on  the  other.  So  also  does  that  of  the  labourer :  when 
the  wealth  of  the  nation  is  progressive,  his  wages  are  high ; 
they  are  low  when  it  is  stationary  or  retrogressive.  "  The 
interest  of  the  third  order  has  not  the  same  connection  with 
the  general  interest  of  the  society  as  that  of  the  other  two ; 
...  it  is  always  in  some  respects  different  from  and  opposite 
to  that  of  the  public." 

The  subject  of  the  second  book  is  "  the  nature,  accumulation, 
and  improvement  of  stock."  A  man's  whole  stock  consists 
of  two  portions — that  which  is  reserved  for  his  immediate 
consumption,  and  that  which  is  employed  so  as  to  yield  a 
revenue  to  its  owner.  This  latter,  which  is  his  "  capital,"  is 
divisible  into  the  two  classes  of  "  fixed "  and  "  circulating." 
The  first  is  such  as  yields  a  profit  without  passing  into  other 
hands.  The  second  consists  of  such  goods,  raised,  manufac- 
tured, or  purchased,  as  are  sold  for  a  profit  and  replaced  by 
other  goods ;  this  sort  of  capital  is  therefore  constantly  going 
from  and  returning  to  the  hands  of  its  owner.  The  whole 


98  POLITICAL  ECONOMY. 

capital  of  a  society  falls  under  the  same  two  heads.  Its  fixed 
capital  consists  chiefly  of  (i)  machines,  (2)  buildings  which  are 
the  means  of  procuring  a  revenue,  (3)  agricultural  improve- 
ments, and  (4)  the  acquired  and  useful  abilities  of  all  members 
of  the  society  (since  sometimes  known  as  "  personal  capital  "). 
Its  circulating  capital  is  also  composed  of  four  parts — (i) 
money,  (2)  provisions  in  the  hands  of  the  dealers,  (3)  materials, 
and  (4)  completed  work  in  the  hands  of  the  manufacturer  or 
merchant.  Next  comes  the  distinction  of  the  gross  national 
revenue  from  the  net, — the  first  being  the  whole  produce  of 
the  land  and  labour  of  a  country,  the  second  what  remains 
after  deducting  the  expense  of  maintaining  the  fixed  capital 
of  the  country  and  that  part  of  its  circulating  capital  which 
consists  of  money.  Money,  "  the  great  wheel  of  circulation," 
is  altogether  different  from  the  goods  which  are  circulated  by 
means  of  it ;  it  is  a  costly  instrument  by  means  of  which  all 
that  each  individual  receives  is  distributed  to  him ;  and  the 
expenditure  required,  first  to  provide  it,  and  afterwards  to 
maintain  it,  is  a  deduction  from  the  net  revenue  of  the  society. 
In  development  of  this  consideration,  Smith  goes  on  to  explain 
the  gain  to  the  community  arising  from  the  substitution  of 
paper  money  for  that  composed  of  the  precious  metals ;  and 
here  occurs  the  remarkable  illustration  in  which  the  use  of  gold 
and  silver  money  is  compared  to  a  highway  on  the  ground, 
that  of  paper  money  to  a  waggon-way  through  the  air.  In 
proceeding  to  consider  the  accumulation  of  capital,  he  is  led  to 
the  distinction  between  productive  and  unproductive  labour, 
— the  former  being  that  which  is  fixed  or  realised  in  a 
particular  object  or  vendible  article,  the  latter  that  which  is 
not  so  realised.  The  former  is  exemplified  in  the  labour  of 
the  manufacturing  workman,  the  latter  in  that  of  the  menial 
servant.  A  broad  line  of  demarcation  is  thus  drawn  between 
the  labour  which  results  in  commodities  or  increased  value 
of  commodities,  and  that  which  does  no  more  than  render 
services :  the  former  is  productive,  the  latter  unproductive. 
"  Productive  "  is  by  no  means  equivalent  to  "  useful : "  the 


SYSTEM  OF  NATURAL  LIBERTY.  95 

labours  of  the  magistrate,  the  soldier,  the  churchman,  lawyer, 
and  physician  are,  in  Smith's  sense,  unproductive.  Productive 
labourers  alone  are  employed  out  of  capital ;  unproductive 
labourers,  as  well  as  those  who  do  not  labour  at  all,  are  all 
maintained  by  revenue.  In  advancing  industrial  communities, 
the  portion  of  annual  produce  set  apart  as  capital  bears  an 
increasing  proportion  to  that  which  is  immediately  destined  to 
constitute  a  revenue,  either  as  rent  or  as  profit.  Parsimony 
is  the  source  of  the  increase  of  capital ;  by  augmenting  the 
fund  devoted  to  the  maintenance  of  productive  hands,  it  puts 
in  motion  an  additional  quantity  of  industry,  which  adds  to 
the  value  of  the  annual  produce.  What  is  annually  saved  is 
as  regularly  consumed  as  what  is  spent,  but  by  a  different  set 
of  persons,  by  productive  labourers  instead  of  idlers  or  unpro- 
ductive labourers ;  and  the  former  reproduce  with  a  profit 
the  value  of  their  consumption.  The  prodigal,  encroaching 
on  his  capital,  diminishes,  as  far  as  in  him  lies,  the  amount  of 
productive  labour,  and  so  the  wealth  of  the  country;  nor  is 
this  result  affected  by  his  expenditure  being  on  home-made, 
as  distinct  from  foreign,  commodities.  Every  prodigalj  there- 
fore,  is  a  public  enemy  ;  every  frugal  man  a  public  benefactor. 
The  only  mode  of  increasing  the  annual  produce  of  the  land 
and  labour  is  to  increase  either  the  number  of  productive 
labourers  or  the  productive  powers  of  those  labourers.  Either 
process  will  in  general  require  additional  capital,  the  former  to 
maintain  the  new  labourers,  the  latter  to  provide  improved 
machinery  or  to  enable  the  employer  to  introduce  a  more 
complete  division  of  labour.  In  what  are  commonly  called 
loans  of  money,  it  is  not  really  the  money,  but  the  money's 
worth,  that  the  borrower  wants ;  and  the  lender  really  assigns 
to  him  the  right  to  a  certain  portion  of  the  annual  produce  of 
the  land  and  labour  of  the  country.  As  the  general  capital  of 
a  country  increases,  so  also  does  the  particular  portion  of  it 
from  which  the  possessors  wish  to  derive  a  revenue  without 
being  at  the  trouble  of  employing  it  themselves  ;  and,  as  the 
quantity  of  stock  thus  available  for  loans  is  augmented,  the 


TOO  POLITICAL  ECONOMY. 

interest  diminishes,  not  merely  "  from  the  general  causes  which 
make  the  market  price  of  things  commonly  diminish  as  theif 
quantity  increases,"  but  because,  with  the  increase  of  capital. 
"  it  becomes  gradually  more  and  more  difficult  to  find  within 
the  country  a  profitable  method  of  employing  any  new  capital," 
— whence  arises  a  competition  between  different  capitals,  and 
a  lowering  of  profits,  which  must  diminish  the  price  which 
can  be  paid  for  the  use  of  capital,  or  in  other  words  the  rate 
of  interest.  It  was  formerly  wrongly  supposed,  and  even  Locke 
and  Montesquieu  did  not  escape  this  error,  that  the  fall  in  the 
value  of  the  precious  metals  consequent  on  the  discovery  of 
the  American  mines  was  the  real  cause  of  the  permanent  lower- 
ing of  the  rate  of  interest  in  Europe.  But  this  view,  already 
refuted  by  Hume,  is  easily  seen  to  be  erroneous.  "  In  some 
countries  the  interest  of  money  has  been  prohibited  by  law. 
But,  as  something  can  everywhere  be  made  by  the  use  of 
money,  something  ought  everywhere  to  be  paid  for  the  use  of 
it,"  and  will  in  fact  be  paid  for  it ;  and  the  prohibition  will 
only  heighten  the  evil  of  usury  by  increasing  the  risk  to  the 
lender.  The  legal  rate  should  be  a  very  little  above  the  lowest 
market  rate ;  sober  people  will  then  be  preferred  as  borrowers 
to  prodigals  and  projectors,  who  at  a  higher  legal  rate  would 
have  an  advantage  over  them,  being  alone  willing  to  offer  that 
higher  rate.1 

As  to  the  different  employments  of  capital,  the  quantity  of 
productive  labour  put  in  motion  by  an  equal  amount  varies 
extremely  according  as  that  amount  is  employed — (i)  in  the 
improvement  of  lands,  mines,  or  fisheries,  (2)  in  manufactures, 
(3)  in  wholesale  or  (4)  retail  trade.  In  agriculture  "  Nature 
labours  along  with  man,"  and  not  only  the  capital  cf  the 
farmer  is  reproduced  with  his  profits,  but  also  the  rent  of  the 
landlord.  It  is  therefore  the  employment  of  a  given  capital 
which  is  most  advantageous  to  society.  Next  in  order  come 
manufactures;  then  wholesale  trade — first  the  home  trade, 

1  See  p.  1 10,  oii  Beutbam. 


SYSTEM  OF  NATURAL  LIBERTY.  101 

secondly  the  foreign  trade  of  consumption,  last  the  carrying- 
trade.  All  these  employments  of  capital,  however,  are  not 
only  advantageous,  but  necessary,  and  will  introduce  them- 
selves in  the  due  degree,  if  they  are  left  to  the  spontaneous 
action  of  individual  enterprise. 

These  first  two  hooks  contain  Smith's  general  economic 
scheme;  and  we  have  stated  it  as  fully  as  was  consistent 
with  the  necessary  brevity,  because  from  this  formulation  of 
doctrine  the  English  classical  school  set  out,  and  round  it  the 
discussions  of  more  recent  times  in  different  countries  have 
in  a  great  measure  revolved.  Some  of  the  criticisms  of  his 
successors  and  their  modifications  of  his  doctrines  will  come 
under  our  notice  as  we  proceed. 

The  critical  philosophers  of  the  eighteenth  century  were 
often  destitute  of  the  historical  spirit,  which  was  no  part  of  the 
endowment  needed  for  their  principal  social  office.  But  some 
of  the  most  eminent  of  them,  especially  in  Scotland,  showed  a 
marked  capacity  and  predilection  for  historical  studies.  Smith 
was  amongst  the  latter ;  Knies  and  others  justly  remark  on 
the  masterly  sketches  of  this  kind  which  occur  in  the  Wealth 
of  Nations.  The  longest  and  most  elaborate  of  these  occupies 
the  third  book ;  it  is  an  account  of  the  course  followed  by  the 
nations  of  modern  Europe  in  the  successive  development  of 
the  several  forms  of  industry.  It  affords  a  curious  example 
of  the  effect  of  doctrinal  prepossessions  in  obscuring  the 
results  of  historical  inquiry.  Whilst  he  correctly  describes 
the  European  movement  of  industry,  and  explains  it  as  aris- 
ing out  of  adequate  social  causes,  he  yet,  in  accordance  with 
the  absolute  principles  which  tainted  his  philosophy,  protests 
against  it  as  involving  an  entire  inversion  of  the  "natural 
order  of  things."  First  agriculture,  then  manufactures,  lastly 
foreign  commerce;  any  other  order  jthan  this  he  considers 
"  unnatural  and  retrograde."  Hume,  a  more  purely  positive 
thinker,  simply  sees  the  facts,  accepts  them,  and  classes  them 
under  a  general  law.  "  It  is  a  violent  method,"  he  says,  "  and 
in  most  cases  impracticable,  to  oblige  the  labourer  to  toil  in 


ica  POLITICAL  ECONOMY. 

order  to  raise  from  the  land  more  than  what  subsists  himself 
and  family.  Furnish  him  with  manufactures  and  commodities, 
and  he  will  do  it  of  himself."  ''If  we  consult  history,  we 
shall  find  that,  in  most  nations,  foreign  trade  has  preceded  any 
refinement  in  home  manufactures,  and  given  birth  to  domestic 
luxury." 

The  fourth  book  is  principally  devoted  to  the  elaborate 
and  exhaustive  polemic  against  the  mercantile  system  which 
finally  drove  it  from  the  field  of  science,  and  has  exercised  a 
powerful  influence  on  economic  legislation.  When  protection 
is  now  advocated,  it  is  commonly  on  different  grounds  from 
those  which  were  in  current  use  before  the  time  of  Smith. 
He  believed  that  to  look  for  the  restoration  of  freedom  of 
foreign  trade  in  Great  Britain  would  have  been  "  as  absurd 
as  to  expect  that  an  Oceana  or  Utopia  should  be  established 
in  it ; "  yet,  mainly  in  consequence  of  his  labours,  that  object 
has  been  completely  attained;  and  it  has  lately  been  said 
with  justice  that  free  trade  might  have  been  more  generally 
accepted  by  other  nations  if  the  patient  reasoning  of  Smith 
had  not  been  replaced  by  dogmatism.  His  teaching  on  the 
subject  is  not  altogether  unqualified;  but,  on  the  whole, 
with  respect  to  exchanges  of  every  kind,  where  economic 
motives  alone  enter,  his  voice  is  in  favour  of  freedom.  He 
has  regard,  however,  to  political  as  well  as  economic  interests, 
and  on  the  ground  that  "  defence  is  of  much  more  importance 
than  opulence,"  pronounces  the  Navigation  Act  to  have  been 
"  perhaps  the  wisest  of  all  the  commercial  regulations  of 
England."  Whilst  objecting  to  the  prevention  of  the  export 
of  wool,  he  proposes  a  tax  on  that  export  as  somewhat  less 
injurious  to  the  interest  of  growers  than  the  prohibition, 
whilst  it  would  "  afford  a  sufficient  advantage  "  to  the  domestic 
over  the  foreign  manufacturer.  This  is,  perhaps,  his  most 
marked  deviation  from  the  rigour  of  principle  ;  it  was  doubt- 
less a  concession  to  popular  opinion  with  a  view  to  an  attain- 
able practical  improvement.  The  wisdom  of  retaliation  in 
order  to  procure  the  repeal  of  high  duties  or  prohibitions 


SYSTEM  OF  NATURAL  LIBERTY.  103 

imposed  by  foreign  Governments  depends,  he  says,  altogether 
on  the  likelihood  of  its  success  in  effecting  the  object  aimed 
at,  but  he  does  not  conceal  his  contempt  for  the  practice  of 
such  expedients.  The  restoration  of  freedom  in  any  manu- 
facture, when  it  has  grown  to  considerable  dimensions  by 
means  of  high  duties,  should,  he  thinks,  from  motives  of 
humanity,  be  brought  about  only  by  degrees  and  with  cir- 
cumspection,— though  the  amount  of  evil  which  would  be 
caused  by  the  immediate  abolition  of  the  duties  is,  in  his 
opinion,  commonly  exaggerated.  The  case  in  which  J.  S. 
Mill  would  tolerate  protection — that,  namely,  in  which  an  in- 
dustry well  adapted  to  a  country  is  kept  down  by  the  acquired 
ascendency  of  foreign  producers — is  referred  to  by  Smith ; 
but  he  is  opposed  to  the  admission  of  this  exception  for 
reasons  which  do  not  appear  to  be  conclusive.1  He  is  perhaps 
scarcely  consistent  in  approving  the  concession  of  tempo- 
rary monopolies  to  joint-stock  companies  undertaking  risky 
enterprises  "  of  which  the  public  is  afterwards  to  reap  the 
benefit."2 

He  is  less  absolute  in  his  doctrine  of  Governmental  non- 
interference when  he  comes  to  consider  in  his  fifth  book 
the  "  expenses  of  the  sovereign  or  the  commonwealth."  He 
recognises  as  coming  within  the  functions  of  the  state  the 
erection  and  maintenance  of  those  public  institutions  and 
public  works  which,  though  advantageous  to  the  society, 
could  not  repay,  and  therefore  must  not  be  thrown  upon, 

1  It  must,  however,  always  be  borne  in  mind  that  the  adoption  by  a  state 
of  this  sort  of  protection  is  liable  to  three  practical  dangers  : — (l)  of  en- 
couragement being  procured  through  political  influences  for  industries 
which  could  never  have  an  independent  healthy  life  in  the  country  ;  (2)  of 
euch  encouragement  being  continued  beyond  the  term  during  which  it 
might  be  usefully  given ;  (3)  of  a  retaliatory  spirit  of  exclusion  being 
provoked  in  other  communities. 

2  Professor  Bastable  calls  the  author's  attention  to  the   interesting 
fact  that  the  proposal  of  an  export  duty  on  wool  and  the  justification 
ef  a  temporary  monopoly  to  joint-stock  companies  both  appear  for  tht 
first  time  in  the  edition  of  1 784. 


io4  POLITICAL  ECONOMY. 

individuals  or  small  groups  of  individuals.  He  remarks  in  • 
just  historical  spirit  that  the  performance  of  these  functions 
requires  very  different  degrees  of  expense  in  the  different 
periods  of  society.  Besides  the  institutions  and  works  in- 
tended for  public  defence  and  the  administration  of  justice, 
and  those  required  for  facilitating  the  commerce  of  the  society, 
he  considers  those  necessary  for  promoting  the  instruction  of 
the  people.  He  thinks  the  public  at  large  may  with  propriety 
not  only  facilitate  and  encourage,  but  even  impose  upon 
almost  the  whole  body  of  the  people,  the  acquisition  in  youth 
of  the  most  essential  elements  of  education.  He  suggests 
as  the  mode  of  enforcing  this  obligation  the  requirement 
of  submission  to  a  test  examination  "  before  any  one  could 
obtain  the  freedom  in  any  corporation,  or  be  allowed  to  set 
up  a  trade  in  any  village  or  town  corporate."  Similarly,  he 
is  of  opinion  that  some  probation,  even  in  the  higher  and 
more  difficult  sciences,  might  be  enforced  as  a  condition  of 
exercising  any  liberal  profession,  or  becoming  a  candidate  for 
any  honourable  office.  The  expense  of  the  institutions  for 
religious  instruction  as  well  as  for  general  education,  he  holds, 
may  without  injustice  be  defrayed  out  of  the  funds  of  the  whole 
society,  though  he  would  apparently  prefer  that  it  should  be 
met  by  the  voluntary  contributions  of  those  who  think  they 
have  occasion  for  such  education  or  instruction.  There  is 
much  that  is  sound,  as  well  as  interesting  and  suggestive,  in 
this  fifth  book,  in  which  he  shows  a  political  instinct  and  a 
breadth  of  view  by  which  he  is  favourably  contrasted  with  the 
Manchester  school.  But,  if  we  may  say  so  without  disrespect 
/  to  so  great  a  man,  there  are  traces  in  it  of  what  is  novr 
called  Philistinism — a  low  view  of  the  ends  of  art  and  poetry 
— which  arose  perhaps  in  part  from  personal  defect,  though 
it  was  common  enough  in  even  the  higher  minds  in  his 
century.  There  are  also  indications  of  a  certain  deadness  t« 
the  lofty  aims  and  perennial  importance  of  religion,  which 
was  no  doubt  chiefly  due  to  the  influences  of  an  age  when 
the  critical  spirit  was  doing  an  indispensable  work,  in  the 


SYSTEM  OF  NATURAL  LIBERTY.  105 

performance  of  which  the  transitory  was  apt  to  be  confounded 
with  the  permanent.  / 

For  the  sake  of  considering  as  a  whole  Smith's  view  of  the 
functions  of  government,  we  have  postponed  noticing  his  treat- 
ment of  the  physiocratic  system,  which  occupies  a  part  of  his 
fourth  book.  He  had  formed  the  acquaintance  of  Quesnay, 
Turgot,  and  other  members  of  their  group  during  his  sojourn 
in  France  in  1765,  and  would,  as  he  told  Dugald  Stewart,  had 
the  patriarch  of  the  school  lived  long  enough,  have  dedicated 
to  him  the  Wealth  of  Nations.  He  declares  that,  with  all  its 
imperfections,  the  system  of  Quesnay  is  "  perhaps  the  nearest 
approximation  to  the  truth  that  had  yet  appeared  on  the  sub- 
ject of  political  economy."  Yet  he  seems  not  to  be  adequately 
conscious  of  the  degree  of  coincidence  between  his  own  doc- 
trines and  those  of  the  physiocrats.  Dupont  de  Nemours 
complained  that  he  did  not  do  Quesnay  the  justice  of  recognis- 
ing him  as  his  spiritual  father.  It  is,  however,  alleged,  on  the 
other  side,  that  already  in  1753  Smith  had  been  teaching  as 
professor  a  body  of  economic  doctrine  the  same  in  its  broad 
features  with  that  contained  in  his  great  work.  This  is  indeed 
said  by  Stewart ;  and,  though  he  gives  no  evidence  of  it,  it  is 
possibly  quite  true ;  if  so,  Smith's  doctrinal  descent  must  be 
traced  rather  from  Hume  than  from  the  French  school.  The 
principal  error  of  this  school,  that,  namely,  of  representing 
agricultural  labour  as  alone  productive,  he  refutes  in  the  fourth 
book,  though  in  a  manner  which  has  not  always  been  con- 
sidered effective.  Traces  of  the  influence  of  their  mistaken 
view  appear  to  remain  in  his  own  work,  as,  for  example,  his 
assertion  that  in  agriculture  nature  labours  along  with  man, 
whilst  in  manufactures  nature  does  nothing,  man  does  all ;  and 
his  distinction  between  productive  and  unproductive  labour, 
which  was  doubtless  suggested  by  their  use  of  those  epithets, 
and  which  is  scarcely  consistent  with  his  recognition  of 
what  is  now  called  "  personal  capital."  To  the  same  source 
M'Culloch  and  others  refer  the  origin  of  Smith's  view,  which 
they  represent  as  an  obvious  error,  that  "  individual  advantage 


io6     .  POLITICAL  ECONOMY. 

is  not  always  a  true  test  of  the  public  advantageousness  of  dif 
ferent  employments."  But  that  view  is  really  quite  correct, 
as  Professor  Nicholson  has  clearly  shown.1  That  the  form 
taken  by  the  use  of  capital,  profits  being  given,  Is  not  indif- 
ferent to  the  working  class  as  a  whole  even  Ricardo  admitted  j 
and  Cairnes,  as  we  shall  see,  built  on  this  consideration  some 
of  the  most  far-reaching  conclusions  in  his  Leading  Principles. 

On  Smith's  theory  of  taxation  in  his  fifth  book  it  is  not 
necessstry  for  us  to  dwell.  The  well-known  canons  which 
he  lays  down  as  prescribing  the  essentials  of  a  good  system 
have  been  generally  accepted.  They  have  lately  been  severely 
criticised  by  Professor  Walker — of  whose  objections,  however, 
there  is  only  one  which  appears  to  be  well  founded.  Smith 
seems  to  favour  the  view  that  the  contribution  of  the  indi- 
vidual to  public  expenses  may  be  regarded  as  payment  for 
the  services  rendered  to  him  by  the  state,  and  ought  to  be 
proportional  to  the  extent  of  those  services.  If  he  held  this 
opinion,  which  some  of  his  expressions  imply,  lie  was  certainly 
so  far  wrong  in  principle.  / V>W.^ 

We  shall  not  be  held  to  anticipate  unduly  if  we  remark 
here  on  the  way  in  which  opinion,  revolted  by  the  aberrations 
of  some  of  Smith's  successors,  has  tended  to  turn  from  the 
disciples  to  the  master.  A  strong  sense  of  his  compara- 
tive freedom  from  the  vicious  tendencies  of  Ricardo  and  his 
followers  has  recently  prompted  the  suggestion  that  we  ought 
now  to  recur  to  Smith,  and  take  up  once  more  from  him  the 
line  of  the  economical  succession.  But  notwithstanding  his 
indisputable  superiority,  and  whilst  fully  recognising  the  great 
services  rendered  by  his  immortal  work,  we  must  not  forget 
that,  as  has  been  already  said,  that  work  was,  on  the  whole, 
a  product,  though  an  exceptionally  eminent  one,  of  the  negative 
philosophy  of  the  last  century,  resting  largely  in  its  ultimate 
foundation  on  metaphysical  bases.  The  mind  of  Smith  waa 
mainly  occupied  with  the  work  of  criticism  so  urgent  in  his 

1  In  the  Introductory  Essay  to  his  edition  of  the  Wealth  of  Nation*. 


SYSTEM  OF  NATURAL  LIBERTY.  107 

time ;  his  principal  task  was  to  discredit  and  overthrow  the 
economic  system  then  prevalent,  and  to  demonstrate  the 
radical  unfitness  of  the  existing  European  Governments  to 
direct  the  industrial  movement.  This  office  of  his  fell  in 
with,  and  formed  a  part  of,  the  general  work  of  demolition 
carried  on  by  the  thinkers  who  gave  to  the  eighteenth  century 
its  characteristic  tone.  It  is  to  his  honour  that,  besides  this 
destructive  operation,  he  contributed  valuable  elements  to  the 
preparation  of  an  organic  system  of  thought  and  of  life.  In  his 
•pecial  domain  he  has  not  merely  extinguished  many  errors 
and  prejudices,  and  cleared  the  ground  for  truth,  but  has  left 
us  a  permanent  possession  in  the  judicious  analyses  of  economic 
facts  and  ideas,  the  wise  practical  suggestions,  and  the  luminous 
indications  of  all  kinds  with  which  his  work  abounds.  Be- 
longing to  the  best  philosophical  school  of  his  period,  that 
with  which  the  names  of  Hume  and  Diderot  are  associated, 
he  tended  strongly  towards  the  positive  point  of  view.  But 
it  was  not  possible  for  him  to  attain  it ;  and  the  final  and 
fully  normal  treatment  of  the  economic  life  of  societies  must 
be  constituted  on  other  and  more  lasting  foundations  than 
those  which  underlie  his  imposing  construction. 

It  has  been  well  said  that  of  philosophic  doctrines  the  saying 
"  By  their  fruits  ye  shall  know  them  "  is  eminently  true.  And 
it  cannot  be  doubted  that  the  germs  of  the  vicious  methods 
and  false  or  exaggerated  theories  of  Smith's  successors  are  to 
be  found  in  his  own  work,  though  his  good  sense  and  practical 
bent  prevented  his  following  out  his  principles  to  their  extreme 
consequences.  The  objections  of  Hildebrand  and  others  to 
the  entire  historical  development  of  doctrine  which  the  Germans 
designate  as  "  Smithianismus "  are  regarded  by  those  critics 
as  applicable,  not  merely  to  his  school  as  a  whole,  but,  though 
in  a  less  degree,  to  himself.  The  following  are  the  most 
important  of  these  objections.  It  is  said — (j.)  Smith's  con- 
ception of  the  social  economy  is  essentially  individualistic. 
In  this  he  falls  in  with  the  general  character  of  the  negative 
philosophy  of  his  age.  That  philosophy,  in  its  most  typical 


io8  -  POLITICAL  ECONOMY. 

forms,  even,  denied  the  natural  existence  of  the  disinterested 
affections,  and  explained  the  altruistic  feelings  as  secondary 
results  of  self-love.  Smith,  however,  like  Hume,  rejected 
these  extreme  views ;  and  hence  it  has  been  held  that  in  tho 
Wealth  of  Nations  he  consciously,  though  tacitly,  abstracted 
from  the  benevolent  principles  in  human  nature,  and  as  a 
logical  artifice  supposed  an  "  economic  man  "  actuated  by  purely 
selfish  motives.  However  this  may  be,  he  certainly  places 
himself  habitually  at  the  point  of  view  of  the  individual,  whom 
he  treats  as  a  purely  egoistic  force,  working  uniformly  in  the 
direction  of  private  gain,  without  regard  to  the  good  of  others 
or  of  the  community  at  large.  (2.)  He  justifies  this  personal 
attitude  by  its  consequences,  presenting  the  optimistic  view 
that  the  good  of  the  community  is  best  attained  through 
the  free  play  of  individual  cupidities,  provided  only  that  the 
law  prevents  the  interference  of  one  member  of  the  society 
with  the  self-seeking  action  of  another.  He  assumes  with 
the  negative  school  at  large — though  he  has  passages  which 
are  not  in  harmony  with  these  propositions — that  every  one 
knows  his  true  interest  and  will  pursue  it,  and  that  the 
economic  advantage  of  the  individual  coincides  with  that  of 
the  society.  To  this  last  conclusion  he  is  secretly  led,  as  we 
have  seen,  by  a  priori  theological  ideas,  and  also  by  meta- 
physical conceptions  of  a  supposed  system  of  nature,  natural 
right,  and  natural  liberty.  (3.)  By  this  reduction  of  every 
question  to  one  of  individual  gain,  he  is  led  to  a  too  exclusive 
consideration  of  exchange  value  as  distinct  from  wealth  in 
the  proper  sense.  This,  whilst  lending  a  mechanical  facility 
in  arriving  at  conclusions,  gives  a  superficial  character  to 
economic  investigation,  divorcing  it  from  the  physical  and 
biological  sciences,  excluding  the  question  of  real  social 
utility,  leaving  no  room  for  a  criticism  of  production,  and 
leading  to  a  denial,  like  J.  S.  Mill's,  of  any  economic  doctrine 
dealing  with  consumption — in  other  words,  with, the  use  of 
wealth.  (4.)  In  condemning  the  existing  industrial  policy, 
lie  tends  too  much  towards  a  glorification  of  non-government 


SYSTEM  OF  NATURAL  LIBERTY.  109 

and  a  repudiation  of  all  social  intervention  for  the  regulation 
of  economic  life.  (5.)  He  does  not  keep  in  view  the  moral 
destination  of  our  race,  nor  regard  wealth  as  a  means  to  the 
higher  ends  of  life,  and  thus  incurs,  not  altogether  unjustly, 
the  charge  of  materialism,  in  the  wider  sense  of  that  word. 
Lastly,  (6.)  his  whole  system  is  too  absolute  in  its  character; 
it  does  not  sufficiently  recognise  the  fact  that,  in  the  language 
of  Hildebrantl,  inan,  as  a  member  of  society,  is  a  child  of 
civilisation  and  a  product  of  history,  and  that  account  ought 
to  be  taken  of  the  different  stages  of  social  development  as 
implying  altered  economic  conditions  and  calling  for  altered 
economic  action,  or  even  involving  a  modification  of  the  actor. 
Perhaps  in  all  the  respects  here  enumerated,  certainly  in  some 
of  them,  and  notably  in  the  last,  Smith  is  less  open  to  criticism 
than  most  of  the  later  English  economists ;  but  it  must,  we 
think,  be  admitted  that  to  the  general  principles  which  lie  at 
the  basis  of  his  scheme  the  ultimate  growth  of  these  several 
vicious  tendencies  is  traceable. 

Great  expectations  had  been  entertained  respecting  Smith's 
work  by  competent  judges  before  its  publication,  as  is  shown 
by  the  language  of  Ferguson  on  the  subject  in  his  History  oj 
Civil  Society.1  That  its  merits  received  prompt  recognition 
is  proved  by  the  fact  of  six  editions  having  been  called  for 
within  the  fifteen  years  after  its  apjiearance.2  From  the  year 

1  "  The  public  will  probably  soon  be  furnished  with  a  theory  of  national 
oeconomy,   equal  to  what  has  ever  appeared  on  any  subject  of  science 
whatever  "  (Pajt  III.  sect.  4). 

2  Five  editions  of  the  Wealth  of  Nations  appeared  during  the  life  of 
the  author: — the  second  in   1779,  the  third  in  1784,  the  fourth  in  1786, 
and  the  fifth  in  1789.     After  the  third  edition  Smith  made  no  change  in 
the  text.      The   principal   editions   containing   matter  added    by   other 
economists  are  those  by  William  Playfair,  with  notes,  1805  ;    by  David 
Buchanan,  with  notes,  1814  ;  by  J.  R.  M'Culloch,  with  life  of  the  author, 
introductory  discourse,  notes,  and  supplemental  dissertations.  1828  (also, 
with  numerous  additions,  1839  ;  since  reprinted  several  times  with  fur- 
ther additions) ;  by  the  author  of  Enyland  and  America  (Edward  Gibbon 
Wakefield),  with  a  commentary,  which,  however,  is  not  continued  beyond 
the  second  book,  1835-9 ;   by  James  E.  Thorold  Rogers,  Professor  of 


no  POLITICAL  ECONOMY. 

1783  it  was  more  and  more  quoted  in  Parliament.  Pitt  was 
greatly  impressed  by  its  reasonings  ;  Smith  is  reported  to  have 
said  that  that  Minister  understood  the  book  as  well  as  himself. 
Pulteney  said  in  1797  that  Smith  would  persuade  the  then 
living  generation  and  would  govern  the  next.1 

Smith's  earliest  critics  were  Bentham  and  Lauderdale,  who, 
though  in  general  agreement  with  him,  differed  on  special 
points.  Jeremy  Bentham  was  author  of  a  short  treatise  en- 
titled A  Manual  of  Political  Economy  and  various  eco- 
nomic monographs,  the  most  celebrated  of  which  was  his 
Defence  of  Usury  (1787).  This  contained  (Letter  xiii.)  an 
elaborate  criticism  of  a  passage  in  the  Wealth  of  Nations, 
already  cited,  in  which  Smith  had  approved  of  a  legal  maxi- 
mum rate  of  interest  fixed  but  a  very  little  above  the  lowest 
market  rate,  as  tending  to  throw  the  capital  of  the  country 
into  the  hands  of  sober  persons,  as  opposed  to  "  prodigals  and 
projectors."  Smith  is  said  to  have  admitted  that  Bentham 
had  made  out  his  case.  He  certainly  argues  it  with  great 
ability  ;2  and  the  true  doctrine  no  doubt  is  that,  in  a  developed 
industrial  society,  it  is  expedient  to  let  the  rate  be  fixed  by 
contract  between  the  lender  and  the  borrower,  the  law  inter- 
fering only  in  case  of  fraud. 

Bentham's  main  significance  does  not  belong  to  the  economic 
field.  But,  on  the  one  hand,  what  is  known  as  Benthamism 
was  undoubtedly,  as  Comte  has  said,3  a  derivative  from  poli- 
tical economy,  and  in  particular  from  the  system  of  natural 

political  economy  at  Oxford,  with  biographical  preface  and  a  careful 
verification  of  all  Smith's  quotations  and  references,  1869  (26.  ed.,  l8So)  ; 
and  by  J.  S.  Nicholson,  professor  at  Edinburgh,  with  notes  referring  to 
sources  of  further  information  on  the  various  topics  handled  in  the  text, 
1884.  There  is  a  careful  Abridgment  by  W.  P.  Emerton  (2d  ed.,  1881), 
founded  on  the  earlier  Analysis  of  Jeremiah  Joyce  (3d  ed.,  1821). 

1  Parl.  Hist.,  vol.  xxxiii.  p.  778. 

2  It  must  be  remembered,  however,  that  the  same  doctrine  had  been 
supported  with  no  less  ability  as  early  as  1769  by  Turgot  in  his  Mtmoirt 
tur  lea  prSts  d' argent. 

•  Lettret  d'  A.  Comte  d  /.  S.  Mill,  p.  4. 


SYSTEM  OF  NATURAL  LIBERTY.  in 

liberty ;  and,  on  the  other,  it  promoted  the  temporary  ascen- 
dency of  that  system  by  extending  to  the  whole  of  social  and 
moral  theory  the  use  of  the  principle  of  individual  interest 
and  the  method  of  deduction  from  that  interest.  This 
alliance  between  political  economy  and  the  scheme  of  Beutham 
is  seen  in  the  personal  group  of  thinkers  which  formed  itself 
round  him, — thinkers  most  inaptly  characterised  by  J.  S.  Mill 
as  "  profound,"  but  certainly  possessed  of  much  acuteness  and 
logical  power,  and  tending,  though  vaguely,  towards  a  positive 
sociology,  which,  from  their  want  of  genuinely  scientific  culture 
and  their  absolute  modes  of  thought,  they  were  incapable  of 
founding. 

Lord  Lauderdale,  in  his  Inquiry  into  the  Nature  and  Origin 
of  Public  Wealth  (1804),  a  book  still  worth  reading,  pointed 
out  curtain  real  weaknesses  in  Smith's  account  of  value  ami 
the  measure  of  value,  and  of  the  productivity  of  labour,  and 
threw  additional  light  on  several  subjects,  such  as  the  true 
mode  of  estimating  the  national  income,  and  the  reaction  of 
the  distribution  of  wealth  on  its  production. 

Smith  stood  just  at  the  beginning  of  a  great  industrial 
revolution.     The  world  of  production  and  commerce  in  which 
he  lived  was  still,  as  Cliffe  Leslie  has  said,  a  "  very  early " 
and  comparatively  narrow  one ;  "  the  only  steam-engine  he 
refers  to  is  Newcomen's,"  and  the  cotton  trade  is  mentioned 
by  him  only  once,  and  that  incidentally.     "  Between  the  years  \ 
1760  and  1770,"  says  Mr.  Marshall,  "Koebuck  began  to  smelt    J 
iron  by  coal,  Brindley  connected  the  rising  seats  of  manufao-  / 
vUres  with  the  sea  by  canals,  Wedgwood  discovered  the  art  of  I 
making  earthenware  cheaply  and  well,  Hargreaves  invented    / 
the   spinning-jenny,  Arkwright  utilised  Wyatt's  and   High's  ( 
inventions  for  spinning  by  rollers  and  applied  water-power  to  \ 
move  them,  and  Watt  invented  the  condensing  steam-engine.    J 
Crompton's  mule  and  Cartwright's  power-loom  came  shortly/ 
after."     Out  of  this  rapid  evolution  followed  a  vast  expan- 
sion of  industry,  but  also  many  deplorable  results,  which,  had 
Smith  been  able  to  foresee  them,  might  have  made  him  a  IBM 

- 


H2  POLITICAL  ECONOMY. 

enthusiastic  believer  in  the  benefits  to  be  wrought  by  the 
mere  liberation  of  effort,  and  a  less  vehement  denouncer  of 
old  institutions  which  in  their  day  had  given  a  partial  pro- 
tection to  labour.  Alongside  of  these  evils  of  the  new  indus- 
trial system,  Socialism  appeared  as  the  alike  inevitable  and 
indispensable  expression  of  the  protest  of  the  working  classes 
and  the  aspiration  after  a  better  order  of  things ;  and  what  we 
now  call  "  the  social  question,"  that  inexorable  problem  of 
modern  life,  rose  into  the  place  which  it  has  ever  since  mnin- 
tained.  This  question  was  first  effectually  brought  before  the 
English  mind  by  Thomas  Robert  Malthus  (1766-1834),  not, 
however,  under  the  impulse  of  revolutionary  sympathies,  but 
in  the  interests  of  a  conservative  policy. 

The  first  edition  of  the  work  which  achieved  this  result 
appeared  anonymously  in  1798  under  the  title — An  Essay 
on  the  Principle  of  Population,  as  it  affects  the  future  im- 
provement of  Society,  with  remarks  on  the  speculations  oj 
Mr.  Godwin,  M.  Condorcet,  and  other  writers.  This  book  arose 
out  of  certain  private  controversies  of  its  author  with  his 
father,  Daniel  Malthus,  who  had  been  a  friend  of  Rousseau, 
and  was  an  ardent  believer  in  the  doctrine  of  human  progress 
as  preached  by  Condorcet  and  other  French  thinkers  and 
by  their  English  disciples.  The  most  distinguished  of  the 
latter  was  William  Godwin,  whose  Enquiry  concerning  Political 
Justice  had  been  published  in  1793.  The  views  put  forward 
in  that  work  had  been  restated  by  its  author  in  the  Enquirer 
(1797),  and  it  was  on  the  essay  in  this  volume  entitled 
"  Avarice  and  Profusion "  that  the  discussion  between  the 
father  and  the  son  arose,  "  the  general  question  of  the  future 
improvement  of  society  "  being  thus  raised  between  them — 
the  elder  Malthus  defending  the  doctrines  of  Godwin,  and  the 
younger  assailing  them.  The  latter  "  sat  down  with  an  in- 
tention of  merely  stating  his  thoughts  on  paper  in  a  clearer 
manner  than  he  thought  he  could  do  in  conversation/'  and 
the  Essay  on  population  was  the  result 

The  social  scheme  of  Godwin  was  founded  on  the  idea  that 


SYSTEM  OF  NATURAL  LIBERTY.  113 

the  evils  of  society  arise  from  the  vices  of  human  institutions. 
There  is  more  than  enough  of  wealth  available  for  all,  but  it 
is  not  equally  shared :  one  has  too  much,  another  has  little  or 
nothing.  Let  this  wealth,  as  well  as  the  labour  of  producing 
it,  be  equally  divided ;  then  every  one  will  by  moderate 
exertion  obtain  sufficient  for  plain  living ;  there  will  be  abun- 
dant leisure,  which  will  be  spent  in  intellectual  and  moral 
self-improvement;  reason  will  determine  human  actions; 
government  and  every  kind  of  force  will  be  unnecessary  ;  and, 
in  time,  by  the  peaceful  influence  of  truth,  perfection  and 
happiness  will  be  established  on  earth.  To  these  glowing 
anticipations  Malthus  opposes  the  facts  of  the  necessity  of 
food  and  the  tendency  of  mankind  to  increase  up  to  the  limit 
of  the  available  supply  of  it.  In  a  state  of  universal  physical 
wellbeing,  this  tendency,  which  in  real  life  is  held  in  check 
by  the  difficulty  of  procuring  a  subsistence,  would  operate 
without  restraint.  Scarcity  would  follow  the  increase  of  num- 
bers ;  the  leisure  would  soon  cease  to  exist ;  the  old  struggle 
for  life  would  recommence ;  and  inequality  would  reign  once 
more.  If  Godwin's  ideal  system,  therefore,  could  be  estab- 
lished, the  single  force  of  the  principle  of  population,  Malthus 
maintained,  would  suffice  to  break  it  down. 

It  will  be  seen  that  the  essay  was  written  with  a  polemical 
object ;  it  was  an  occasional  pamphlet  directed  against  the 
Utopias  of  the  day,  not  at  all  a  systematic  treatise  on  popula- 
tion suggested  by  a  purely  scientific  interest.  As  a  polemic,  it 
was  decidedly  successful ;  it  was  no  difficult  task  to  dispose 
of  the  scheme  of  equality  propounded  by  Godwin.  Already, 
in  1761,  Dr.  Kobert  Wallace  had  published  a  work  (which 
was  used  by  Malthus  in  the  composition  of  his  essay)  entitled 
Various  Prospects  of  Mankind,  Nature,  and  Providence,  in 
which,  after  speaking  of  a  community  of  goods  as  a  remedy 
for  the  ills  of  society,  he  confessed  that  he  saw  one  fatal 
objection  to  such  a  social  organisation,  namely,  "  the  excessive 
population  that  would  ensue."  With  Condorcet's  extrava- 
gances, too,  Malthus  easily  dealt.  That  eminent  man,  amidst 


114  POLITICAL  ECONOMY. 

the  tempest  of  the  French  Revolution,  had  written,  whilst  in 
hiding  from  his  enemies,  his  Esquisse  d'un  tableau  historique 
de  Tesprit  humain.  The  general  conception  of  this  book 
makes  its  appearance  an  epoch  in  the  history  of  the  rise  of 
sociology.  In  it,  if  we  except  some  partial  sketches  by  Turgot,1 
is  for  the  first  time  explained  the  idea  of  a  theory  of  social 
dynamics  founded  on  history ;  and  its  author  is  on  this  ground 
recognised  by  Comte  as  his  principal  immediate  predecessor, 
But  in  the  execution  of  his  great  project  Condorcet  failed. 
His  negative  metaphysics  prevent  his  justly  appreciating  the 
past,  and  he  indulges,  at  the  close  of  his  work,  in  vague 
hypotheses  respecting  the  perfectibility  of  our  race,  and  in 
irrational  expectations  of  an  indefinite  extension  of  the  dura- 
tion of  human  life.  Malthus  seems  to  have  little  sense  of  the 
nobleness  of  Condorcet's  attitude,  and  no  appreciation  of  the 
grandeur  of  his  leading  idea.  But  of  his  chimerical  hopes  he 
is  able  to  make  short  work ;  his  good  sense,  if  somewhat 
limited  and  prosaic,  is  at  least  effectual  in  detecting  and 
exposing  utopias. 

The  project  of  a  formal  and  detailed  treatise  on  population 
was  an  after-thought  of  Malthus.  The  essay  in  which  he  had 
studied  a  hypothetic  future  led  him  to  examine  the  effects 
of  the  principle  he  had  put  forward  on  the  past  and  present 
state  of  society ;  and  he  undertook  an  historical  examination 
of  these  effects,  and  sought  to  draw  such  inferences  in 
relation  to  the  actual  state  of  things  as  experience  seemed  to 
warrant.  The  consequence  of  this  was  such  a  change  in  the 
nature  and  composition  of  the  essay  as  made  it,  in  his  own 
language,  "a  new  work."  The  book,  so  altered,  appeared  in 
1803  under  the  title,  An  Essay  on  the  Principle  of  Popu- 
lation, or  a  View  of  its  Past  and  Present  Effects  on  Human 
Happiness  ;  with  an  Enquiry  into  our  prospects  respecting  the 
future  removal  or  mitigation  of  the  evils  which  it  occasions. 

1  In  his  discourse  at  the  Sorbonne  (1750),  Sur  Its  progrtt  tuccessif t  dt 
humain. 


SYSTEM  OF  NATURAL  LIBERTY.  115 

In  the  original  form  of  the  essay  he  had  spoken  of  no 
checks  to  population  but  those  which  came  under  the  head 
either  of  vice  or  of  misery.  He  now  introduces  the  new 
element  of  the  preventive  check  supplied  by  what  he  calls 
"  moral  restraint,"  and  is  thus  enabled  to  "  soften  some  of 
the  harshest  conclusions "  at  which  he  had  before  arrived. 
The  treatise  passed  through  six  editions  l  in  his  lifetime,  and 
in  all  of  them  he  introduced  various  additions  and  correc- 
tions. That  of  1817  is  the  last  he  fully  revised,  and  presents 
the  text  substantially  as  it  has  since  been  reprinted. 

Notwithstanding  the  great  development  which  he  gave  to 
his  work,  and  the  almost  unprecedented  amount  of  discussion 
to  which  it  gave  rise,  it  remains  a  matter  of  some  difficulty  to 
discover  what  solid  contribution  he  has  made  to  our  know- 
ledge, nor  is  it  easy  to  ascertain  precisely  what  practical 
precepts,  not  already  familiar,  he  founded  on  his  theoretic 
principles.  This  twofold  vagueness  is  well  brought  out  in 
his  celebrated  correspondence  with  Senior,  in  the  course  of 
which  it  seems  to  be  made  apparent  that  his  doctrine  is  new 
not  so  much  in  its  essence  as  in  the  phraseology  in  which  it  is 
couched.  He  himself  tells  us  that  when,  after  the  publication 
of  the  original  essay,  the  main  argument  of  which  he  had 
deduced  from  Hume,  Wallace,  Smith,  and  Price,  he  began  to 
inquire  more  closely  into  the  subject,  he  found  that  "much 
more  had  been  done  "  upon  it  "  than  he  had  been  aware  of." 
It  had  "  been  treated  in  such  a  manner  by  some  of  the  French 
economists,  occasionally  by  Montesquieu,  and,  among  our  own 
writers,  by  Dr.  Franklin,  Sir  James  Steuart,  Mr.  Arthur  Young, 
and  Mr.  Townsend,  as  to  create  a  natural  surprise  that  it 
had  not  excited  more  of  the  public  attention."  "  Much, 
however,"  he  thought,  "  remained  yet  to  be  done.  The 
comparison  between  the  increase  of  population  and  food  had 
not,  perhaps,  been  stated  with  sufficient  force  and  precision," 
and  "  few  inquiries  had  been  made  into  the  various  modes  by 

1  Their  dates  are  1798,  1803,  1806,  1807,  1817,  18261 


u6  POLITICAL  ECONOMY. 

which  the  level "  between  population  and  the  means  of 
subsistence  "is  effected."  The  first  desideratum  here  men- 
tioned— the  want,  namely,  of  an  accurate  statement  of  the 
relation  between  the  increase  of  population  and  food — Malthus 
doubtless  supposed  to  have  been  supplied  by  the  celebrated 
proposition  that  "  population  increases  in  a  geometrical,  food 
in  an  arithmetical  ratio."  This  proposition,  however,  has  been 
conclusively  shown  to  be  erroneous,  there  being  no  such  dif- 
ference of  law  between  the  increase  of  man  and  that  of  the 
organic  beings  which  form  his  food.  J.  S.  Mill  is  indignant 
with  those  who  criticise  Malthus's  formula,  which  he  ground- 
lessly  describes  as  a  mere  "  passing  remark,"  because,  as  he 
thinks,  though  erroneous,  it  sufficiently  suggests  what  is  true  j 
but  it  is  surely  important  to  detect  unreal  science,  and  to 
test  strictly  the  foundations  of  beliefs.  When  the  formula 
which  we  have  cited  is  not  used,  other  somewhat  nebulous 
expressions  are  frequently  employed,  as,  for  example,  that 
"  population  has  a  tendency  to  increase  faster  than  food,"  a 
sentence  in  which  both  are  treated  as  if  they  were  spontaneous 
growths,  and  which,  on  account  of  the  ambiguity  of  the  word 
"tendency,"  is  admittedly  consistent  with  the  fact  asserted 
by  Senior,  that  food  tends  to  increase  faster  than  population. 
It  must  always  have  been  perfectly  well  known  that  popula- 
tion will  probably  (though  not  necessarily)  increase  with  every 
augmentation  of  the  supply  of  subsistence,  and  may,  in  some 
instances,  inconveniently  press  upon,  or  even  for  a  certain  time 
exceed,  the  number  properly  corresponding  to  that  supply. 
iJor  could  it  ever  have  been  doubted  that  war,  disease,  poverty 
— the  last  two  often  the  consequences  of  vice — are  causes 
which  keep  population  down.  In  fact,  the  way  in  which 
abundance,  increase  of  numbers,  want,  increase  of  deaths, 
succeed  each  other  in  the  natural  economy,  when  reason  does 
not  intervene,  had  been  fully  explained  by  the  Rev.  Joseph 
Townsend  in  his  Dissertation  on  the  Poor  Laws  (1786), 
•which  was  known  to  Malthus.  Again,  it  is  surely  plain 
enough  that  the  apprehension  by  individuals  of  the  evils  of 


SYSTEM  OF  NATURAL  LIBERTY.  117 

poverty,  or  a  sense  of  duty  to  their  possible  offspring,  may 
retard  the  increase  of  population,  and  has  in  all  civilised 
communities  operated  to  a  certain  extent  in  that  way.  It  is 
only  when  such  obvious  truths  are  clothed  in  the  technical 
terminology  of  "positive"  and  "preventive  checks"  that 
they  appear  novel  and  profound  ;  and  yet  they  appear  to  con- 
tain the  whole  message  of  Malthus  to  mankind.  The  labo- 
rious apparatus  of  historical  and  statistical  facts  respecting 
the  several  countries  of  the  globe,  adduced  in  the  altered 
form  of  the  essay,  though  it  contains  a  good  deal  that  is 
curious  and  interesting,  establishes  no  general  result  which 
was  not  previously  well  known,  and  is  accordingly  ignored 
by  James  Mill  and  others,  who  rest  the  theory  on  facts  patent 
to  universal  observation.  Indeed,  as  we  have  seen,  the  entire 
historical  inquiry  was  an  after-thought  of  Malthus,  who, 
before  entering  on  it,  had  already  announced  his  fundamental 
principle. 

It  would  seem,  then,  that 'what  has  been  ambitiously  called 
Malthus's  theory  of  population,  instead  of  being  a  great  dis- 
covery, as  some  have  represented  it,  or  a  poisonous  novelty, 
as  others  have  considered  it,  is  no  more  than  a  formal  enun- 
ciation of  obvious,  though  sometimes  neglected,  facts.  The 
pretentious  language  often  applied  to  it  by  economists  is 
objectionable,  as  being  apt  to  make  us  forget  that  the  whole 
subject  with  which  it  deals  is  as  yet  very  imperfectly  under- j 
stood — the  causes  which  modify  the  force  of  the  sexual 
instinct,  and  those  which  lead  to  variations  in  fecundity,  still  t 
awaiting  a  complete  investigation.1 

It  is  the  law  of  diminishing  returns  from  land  (of  which 
more  will  be  said  hereafter),  involving  as  it  does — though 
only  hypothetical^ — the  prospect  of  a  continuously  increasing 
difficulty  in  obtaining  the  necessary  sustenance  for  all  the 
members  of  a  society,  that  gives  the  principal  importance  to 
population  as  an  economic  factor.  It  is,  in  fact,  the  conflu- 

1  On  this  subject  see  the  speculations  of  Mr.  Herbert  Spencer  in  nil 
Principles  of  Biology,  Part  VI.  chaps,  xii.  xiii 


ii8  POLITICAL  ECONOMY. 

ence  of  the  Malthusian  ideas  with  the  theories  of  Ricardo, 
especially  with  the  corollaries  which  the  latter,  as  we  shall 
see,  deduced  from  the  doctrine  of  rent  (though  these  were 
not  accepted  by  Malthus),  that  has  led  to  the  introduction 
of  population  as  an  element  in  the  discussion  of  so  many 
economic  questions  in  recent  times. 

Malthus  had  undoubtedly  the  great  merit  of  having  called 
public  attention  in  a  striking  and  impressive  way  to  a  subject 
which  had  neither  theoretically  nor  practically  been  sufficiently 
considered.  But  he  and  his  followers  appear  to  have  greatly 
exaggerated  both  the  magnitude  and  the  urgency  of  the 
dangers  to  which  they  pointed.1  In  their  conceptions  a  single 
social  imperfection  assumed  such  portentous  dimensions  that 
it  seemed  to  overcloud  the  whole  heaven  and  threaten  the 
world  with  ruin.  This  doubtless  arose  from  his  having  at 
first  omitted  altogether  from  his  view  of  the  question  the 
great  counteracting  agency  of  moral  restraint.  Because  a 
force  exists,  capable,  if  unchecked,  of  producing  certain 
results,  it  does  not  follow  that  those  results  are  imminent  or 
even  possible  in  the  sphere  of  experience.  A  body  thrown 
from  the  hand  would,  under  the  single  impulse  of  projection, 
move  for  ever  in  a  straight  line ;  but  it  would  not  be  reason- 
able to  take  special  action  for  the  prevention  of  this  result, 
ignoring  the  fact  that  it  will  be  sufficiently  counteracted  by 
the  other  forces  which  will  come  into  play.  And  such  other 
forces  exist  in  the  case  we  are  considering.  If  the  inherent 
energy  of  the  principle  of  population  (supposed  everywhere 
the  same)  is  measured  by  the  rate  at  which  numbers  increase 
under  the  most  favourable  circumstances,  surely  the  force  of 
less  favourable  circumstances,  acting  through  prudential  or 
altruistic  motives,  is  measured  by  the  great  difference  between 
this  maximum  rate  and  those  which  are  observed  to  prevail  in 
most  European  countries.  Under  a  rational  system  of  insti- 

i  Malthus  himself  said  : — "  It  is  probable  that,  having  found  the  bow 
bent  too  much  one  way,  I  was  induced  to  bend  it  too  much  the  other  in 
order  to  make  it  straight." 


SYSTEM  OF  NATURAL  LIBERTY.  iig 

tutions,  the  adaptation  of  numbers  to  the  means  available  for 
their  support  is  effected  by  the  felt  or  anticipated  pressure 
of  circumstances  and  the  fear  of  social  degradation,  within  a 
tolerable  degree  of  approximation  to  what  is  desirable.  To 
bring  the  result  nearer  to  the  just  standard,  a  higher  measure 
of  popular  enlightenment  and  more  serious  habits  of  moral 
reflection  ought  indeed  to  be  encouraged.  But  it  is  the  duty 
of  the  individual  to  his  actual  or  possible  offspring,  and  not 
any  vague  notions  as  to  the  pressure  of  the  national  population 
on  subsistence,  that  will  be  adequate  to  influence  conduct 

The  only  obligation  on  which  Malthus  insists  is  that  of 
abstinence  from  marriage  so  long  as  the  necessary  provision 
for  a  family  has  not  been  acquired  or  cannot  be  reasonably 
anticipated.  The  idea  of  post-nuptial  continence,  which  has 
since  been  put  forward  by  J.  S.  Mill  and  others,  is  foreign  to 
his  view.  He  even  suggests  that  an  allowance  might  be  made 
from  the  public  funds  for  every  child  in  a  family  beyond  the 
number  of  six,  on  the  ground  that,  when  a  man  marries,  he 
cannot  tell  how  many  children  he  shall  have,  and  that  the 
relief  from  an  unlooked-for  distress  afforded  by  such  a  grant 
would  not  operate  as  an  encouragement  to  marriage.  The 
duty  of  economic  prudence  in  entering  on  the  married  state  is 
'  plain ;  but  in  the  case  of  working  men  the  idea  of  a  secured 
provision  must  not  be  unduly  pressed,  and  it  must  also  be 
remembered  that  the  proper  age  for  marriage  in  any  class  de- 
pends on  the  duration  of  life  in  that  class.  Too  early  mar- 
riages, however,  are  certainly  not  unfrequent,  and  they  are 
attended  with  other  than  material  evils,  so  that  possibly  even 
legal  measures  might  with  advantage  be  resorted  to  for  pre- 
venting them  in  all  ranks  by  somewhat  postponing  the  age 
of  full  civil  competence.  On  the  other  hand,  however,  the 
Malthusians  often  speak  too  lightly  of  involuntary  celibacy, 
not  recognising  sufficiently  that  it  is  a  deplorable  necessity. 
They  do  not  adequately  estimate  the  value  of  domestic  life  as 
a  school  of  the  civic  virtues,  and  the  social  importance  (even 
apart  from  personal  happiness)  of  the  mutual  affective  educa- 


120  POLITICAL  ECONOMY. 

tion  arising  from  the  relations  of  the  sexes  in  a  well-constituted 
union. 

Malthus  further  infers  from  his  principles  that  states  should 
not  artificially  stimulate  population,  and  in  particular  that 
poor-laws  should  not  he  estahlished,  and,  where  they  exist, 
should  be  abolished.  The  first  part  of  this  proposition  cannot 
be  accepted  as  applying  to  every  social  phase,  for  it  is  evident 
that  in  a  case  like  that  of  ancient  Rome,  where  continuous 
conquest  was  the  chief  occupation  of  the  national  activity,  or 
in  other  periods  when  protracted  wars  threatened  the  inde- 
pendence or  security  of  nations,  statesmen  might  wisely  take 
special  action  of  the  kind  deprecated  by  Malthus.  In  relation 
to  modern  industrial  communities  he  is  doubtless  in  general 
right,  though  the  promotion  of  immigration  in  new  states  is 
similar  in  principle  to  the  encouragement  of  population.  The 
question  of  poor-laws  involves  other  considerations.  The 
English  system  of  his  day  was,  indeed,  a  vicious  one,  though 
acting  in  some  degree  as  a  corrective  of  other  evils  in  our 
social  institutions ;  and  efforts  for  its  amendment  tended  to  the 
public  good.  But  the  proposal  of  abolition  is  one  from  which 
statesmen  have  recoiled,  and  which  general  opinion  has  never 
adopted.  It  is  difficult  to  believe  that  the  present  system  will 
be  permanent ;  it  is  too  mechanical  and  undiscriminating ;  on 
some  sides  too  lax,  it  is  often  unduly  rigorous  in  the  treatment 
of  the  worthy  poor  who  are  the  victims  of  misfortune ;  and, 
in  its  ordinary  modes  of  dealing  with  the  young,  it  is  open  to 
grave  objection.  But  it  would  certainly  be  rash  to  abolish  it ; 
it  is  one  of  several  institutions  which  will  more  wisely  be 
retained  until  the  whole  subject  of  the  life  of  the  working 
classes  has  been  more  thoroughly,  and  also  more  sympatheti- 
cally, studied.  The  position  of  Malthus  with  respect  to  the 
relief  of  destitution  is  subject  to  this  general  criticism,  that, 
first  proving  too  much,  he  then  shrinks  from  the  consequences 
of  his  own  logic.  It  follows  from  his  arguments,  and  is  indeed 
explicitly  stated  in  a  celebrated  passage  of  his  original  essay, 
that  he  who  has  brought  children  into  the  world  without 


SYSTEM  OF  NATURAL  LIBERTY.  121 

adequate  provision  for  them  should  be  left  to  the  punishment 
of  Nature,  that  "  it  is  a  miserable  ambition  to  wish  to  snatch 
the  rod  from  her  hand,"  and  to  defeat  the  action  of  her  laws, 
which  are  the  laws  of  God,  and  which  "  have,  doomed  him 
and  his  family  to  suffer."  Though  his  theory  leads  him  to 
this  conclusion,  he  could  not,  as  a  Christian  clergyman,  main- 
tain the  doctrine  that,  seeing  our  brother  in  need,  we  ought 
to  shut  up  our  bowels  of  compassion  from  him  ;  and  thus  he 
is  involved  in  the  radical  inconsequence  of  admitting  the  law- 
fulness, if  not  the  duty,  of  relieving  distress  in  cases  where  he 
yet  must  regard  the  act  as  doing  mischief  to  society.  Buckle, 
who  was  imposed  on  by  more  than  one  of  the  exaggerations 
of  the  economists,  accepts  the  logical  inference  which  Malthua 
evaded.  He  alleges  that  the  only  ground  on  which  we  are 
justified  in  relieving  destitution  is  the  essentially  self-regard- 
ing one,  that  by  remaining  deaf  to  the  appeal  of  the  sufferer  we 
should  probably  blunt  the  edge  of  our  own  finer  sensibilities. 

It  can  scarcely  be  doubted  that  the  favour  which  was  at 
once  accorded  to  the  views  of  Malthus  in  certain  circles  was 
due  in  part  to  an  impression,  very  welcome  to  the  higher  ranks 
of  society,  that  they  tended  to  relieve  the  rich  and  powerful 
of  responsibility  for  the  condition  of  the  working  classes,  by 
showing  that  the  latter  had  chiefly  themselves  to  blame,  and 
not  either  the  negligence  of  their  superiors  or  the  institutions 
of  the  country.  The  application  of  his  doctrines,  too,  made 
by  some  of  his  successors  had  the  effect  of  discouraging  all 
active  effort  for  social  improvement.  Thus  Chalmers  "  reviews 
seriatim  and  gravely  sets  aside  all  the  schemes  usually  pro- 
posed for  the  amelioration  of  the  economic  condition  of  the 
people"  on  the  ground  that  an  increase  of  comfort  will  lead 
to  an  increase  of  numbers,  and  so  the  last  state  of  things  will 
be  worse  than  the  first. 

Malthus  has  in  more  recent  times  derived  a  certain  degree 
of  reflected  lustre  from  the  rise  and  wide  acceptance  of  the 
Darwinian  hypothesis.  Its  author  himself,  in  tracing  its 
filiation,  points  to  the  phrase  "  struggle  for  existence  "  used  by 


121  POLITICAL  ECONOMY. 

Malthus  in  relation  to  the  social  competition.  Darwin  believe* 
that  man  has  advanced  to  his  present  high  condition  through 
such  a  struggle,  consequent  on  his  rapid  multiplication.  He 
regards,  it  is  true,  the  agency  of  this  cause  for  the  improve- 
ment of  our  race  as  largely  superseded  by  moral  influences  in 
the  more  advanced  social  stages.  Yet  he  considers  it,  even 
in  these  stages,  of  so  much  importance  towards  that  end, 
that  notwithstanding  the  individual  suffering  arising  from 
the  struggle  for  life,  he  deprecates  any  great  reduction  in 
the  natural,  by  which  he  seems  to  mean  the  ordinary,  rate  of 
increase. 

There  has  been  of  late  exhibited  in  some  quarters  a  ten- 
dency to  apply  the  doctrine  of  the  "survival  of  the  fittest" 
to  human  society  in  such  a  way  as  to  intensify  the  harsher 
features  of  Maltlms's  exposition  by  encouraging  the  idea  that 
whatever  cannot  sustain  itself  is  fated,  and  must  be  allowed, 
to  disappear.  But  what  is  repellent  in  this  conception  is 
removed  by  a  wider  view  of  the  influence  of  Humanity,  aa 
a  disposing  power,  alike  on  vital  and  on  social  conditions.  As 
in  the  general  animal  domain  the  supremacy  of  man  introduces 
a  new  force  consciously  controlling  and  ultimately  determining 
the  destinies  of  the  subordinate  species,  so  human  providence 
in  the  social  sphere  can  intervene  for  the  protection  of  the 
weak,  modifying  by  its  deliberate  action  what  would  otherwise 
be  a  mere  contest  of  comparative  strengths  inspired  by  selfish 
instincts.1 

David  Ricardo  (1772-1823)  is  essentially  of  the  school  of 
Smith,  whose  doctrines  he  in  the  main  accepts,  whilst  he 
seeks  to  develop  them,  and  to  correct  them  in  certain  par- 

1  The  Essay  on  Population  and  the  Inquiry  into  the  Nature  and  Pro- 
gressof  Rent  (i8i5),  to  be  hereafter  mentioned,  are  by  far  the  most  im- 
portant contributions  of  Malthus  to  the  science.  He  was  also  author  of 
Principles  of  Political  Economy  (1820),  Definitions  in  Political  Economy 
(1827),  and  other  minor  pieces.  On  these  less  important  writings  of 
Malthus,  and  on  his  personal  history,  see  Malthus  and  his  Work  (i885), 
by  James  Bonar,  who  has  also  edited  (1888)  Ricardo's  Letters  to  Malthus, 


SYSTEM  OF  NATURAL  LIBERTY.  123 

ticulars.  But  his  mode  of  treatment  is  very  different  from 
Smith's.  The  latter  aims  at  keeping  close  to  the  realities  of  _, 
life  as  he  finds  them, — at  representing  the  conditions  and  ^ 
relations  of  men  and  things  as  they  are  ;  and,  as  Hume  re- 
marked on  first  reading  his  great  work,  his  principles  are 
everywhere  exemplified  and  illustrated  with  curious  facts. 
Quite  unlike  this  is  the  way  in  which  Ricardo  proceeds.  He  \£U> 
moves  in  a  world  of  abstractions.  He  sets  out  from  more  or 
less  arbitrary  assumptions,  reasons  deductively  from  these,  and 
announces  his  conclusions  as  true,  without  allowing  for  the 
partial  unreality  of  the  conditions  assumed  or  confronting 
his  results  with  experience.  When  he  seeks  to  illustrate  his 
doctrines,  it  is  from  hypothetical  cases, — his  favourite  device 
being  that  of  imagining  two  contracting  savages,  and  consider- 
ing how  they  would  be  likely  to  act.  He  does  not  explain — 
probably  he  had  not  systematically  examined,  perhaps  was 
not  competent  to  examine — the  appropriate  method  of  poli- 
tical economy;  and  the  theoretic  defence  of  his  mode  of 
proceeding  was  left  to  be  elaborated  by  J.  S.  Mill  and  Cairnes. 
But  his  example  had  a  great  effect  in  determining  the  practice 
of  his  successors.  There  was  something  highly  attractive  to 
the  ambitious  theorist  in  the  sweeping  march  of  logic  which 
seemed  in  Ricardo's  hands  to  emulate  the  certainty  and  com- 
prehensiveness of  mathematical  proof,  and  in  the  portable  and 
pregnant  formulae  which  were  so  convenient  in  argument,  and 
gave  a  prompt,  if  often  a  more  apparent  than  real,  solution  of 
difficult  problems.  Whatever  there  was  of  false  or  narrow 
in  the  fundamental  positions  of  Smith  had  been  in  a  great 
degree  corrected  by  his  practical  sense  and  strong  instinct  for 
reality,  but  was  brought  out  in  its  full  dimensions  and  even 
exaggerated  in  the  abstract  theorems  of  Ricardo  and  his 
followers. 

The  dangers  inherent  in  his  method  were  aggravated  by  the 
extreme  looseness  of  his  phraseology.  Senior  pronounces  him 
"the  most  incorrect  writer  who  ever  attained  philosophical 
eminence."  His  most  ardent  admirers  find  him  fluctuating 


124  POLITICAL  ECONOMY. 

and  uncertain  in  the  use  of  words,  and  generally  trace  his 
errors  to  a  confusion  between  the  ordinary  employment  of  a 
term  and  some  special  application  of  it  which  he  has  himself 
devised. 

The  most  complete  exposition  of  his  system  is  to  be  found 
in  his  Principles  of  Political  Economy  and  Taxation  (1817). 
This  work  is  not  a  complete  treatise  on  the  science,  but  a 
rather  loosely  connected  series  of  disquisitions  on  value  and 
price,  rent,  wages  and  profits,  taxes,  trade,  money  and  banking. 
Yet,  though  the  connection  of  the  parts  is  loose,  the  same 
fundamental  ideas  recur  continually,  and  determine  the 
character  of  the  entire  scheme. 

The  principal  problem  to  which  he  addresses  himself  in  this 
work  is  that  of  distribution, — that  is  to  say,  the  proportions 
of  the  whole  produce  of  the  country  which  will  be  allotted  to 
the  proprietor  of  land,  to  the  capitalist,  and  to  the  labourer. 
And  it  is  important  to  observe  that  it  is  especially  the  varia- 
tions in  their  respective  portions  which  take  place  in  the  pro- 
gress of  society  that  he  professes  to  study, — one  of  the  most 
unhistorical  of  writers  thus  indicating  a  sense  of  the  necessity 
of  a  doctrine  of  economic  dynamics — a  doctrine  which,  from 
his  point  of  view,  it  was  impossible  to  supply. 

The  principle  which  he  puts  first  in  order,  and  which  is 
indeed  the  key  to  the  whole,  is  this — that  the  exchange_value 
of  any  commodity  the  supply  of  which  can  be  increased  at  will 
is  regulated,  under  a  regime  of  free  competition,  by  the  labour 
necessary  for  its  production.  Similar  propositions  are  to  be 
found  in  the  Wealth  of  Nations,  not  to  speak  of  earlier  English 
writings.  Smith  had  said  that,  "  in  the  early  and  rude  state 
of  society  which  precedes  both  the  accumulation  of  stock  and 
the  appropriation  of  land,  the  proportion  between  the  quan- 
tities of  labour  necessary  for  acquiring  different  objects  seems 
to  be  the  only  circumstance  which  can  afford  any  rule  for  ex- 
changing them  with  one  another."  But  he  wavers  in  his  con- 
ception, and  present?  as  the  measure  of  value  sometimes  the 
quantity  of  labour  necessary  for  the  production  of  the  object, 


SYSTEM  OF  NATURAL  LIBERTY.  125 

sometimes  the  quantity  of  labour  which  the  object  would  com- 
mand in  the  market,  which  would  be  identical  only  for  a  given 
time  and  place.  The  theorem  requires  correction  for  a  deve- 
loped social  system  by  the  introduction  of  the  consideration 
of  capital,  and  takes  the  form  in  which  it  is  elsewhere  quoted 
from  Malthus  by  Ricardo,  that  the  real  price  of  a  commodity 
"  depends  on  the  greater  or  less  quantity  of  capital  and  labour 
which  must  be  employed  to  produce  it."  (The  expression 
"  quantity  of  capital "  is  lax,  the  element  of  time  being  omitted, 
but  the  meaning  is  obvious.)  Ricardo,  however,  constantly 
takes  no  notice  of  capital,  mentioning  labour  alone  in  his  state- 
ment of  this  principle,  and  seeks  to  justify  his  practice  by 
treating  capital  as  "accumulated  labour;"  but  this  artificial 
way  of  viewing  the  facts  obscures  the  nature  of  the  co-opera- 
tion of  capital  in  production,  and  by  keeping  the  necessity  of 
this  co-operation  out  of  sight  has  encouraged  some  socialistic 
errors.  Ricardo  does  not  sufficiently  distinguish  between  the 
cause  or  determinant  and  the  measure  of  value ;  nor  does  he 
carry  back  the  principle  of  cost  of  production  as  regulator  of 
value  to  its  foundation  in  the  effect  of  that  cost  on  the  limita- 
tion of  supply.  It  is  the  "  natural  price  "  of  a  commodity  that 
is  fixed  by  the  theorem  we  have  stated ;  the  market  price  will 
be  subject  to  accidental  and  temporary  variations  from  this 
standard,  depending  on  changes  in  demand  and  supply ;  but 
the  price  will,  permanently  and  in  the  long  run,  depend  on 
cost  of  production  defined  as  above.  On  this  basis  Ricardo 
goes  on  to  explain  the  laws  according  to  which  the  produce  of 
the  land  and  the  labour  of  the  country  is  distributed  amongst 
the  several  classes  which  take  part  in  production. 

The  theory  of  rent,  with  which  he  begins,  though  commonly 
associated  with  his  name,  and  though  it  certainly  forms  the 
most  vital  part  of  his  general  economic  scheme,  was  not  really 
his,  nor  did  he  lay  claim  to  it.  He  distinctly  states  in  the 
preface  to  the  Principles,  that  "in  1815  Mr  Malthus,  in  his 
Inquiry  into  the  Nature  and  Progress  of  Rent,  and  a  fellow  of 
University  College,  Oxford,  in  his  Essay  on  the  Application  of 


126  POLITICAL  ECONOMY. 

Capital  to  Land,  presented  to  the  world,  nearly  at  the  sam« 
moment,  the  true  doctrine  of  rent."  The  second  writer  here 
referred  to  was  Sir  Edward  West,  afterwards  a  judgvj  of  the 
supreme  court  of  Bombay.  Still  earlier  than  the  time  of 
Malthus  and  "West,  as  M'Culloch  has  pointed  out,  this  doctrine 
had  been  clearly  conceived  and  fully  stated  by  Dr.  James 
Anderson  in  his  Enquiry  into  the  Nature  of  Corn-Laws,  pub- 
lished at  Edinburgh  in  1777.*  That  this  tract  was  unknown 
to  Malthus  and  West  we  have  every  reason  to  believe ;  but 
the  theory  is  certainly  as  distinctly  enunciated  and  as  satis- 
factorily supported  in  it  as  in  their  treatises ;  and  the  whole 
way  in  which  it  is  put  forward  by  Anderson  strikingly  re- 
sembles the  form  in  which  it  is  presented  by  Eicardo. 

The  essence  of  the  theory  is  that  rent,  being  the  price  paid 
by  the  cultivator  to  the  owner  of  land  for  the  use  of  its 
productive  powers,  is  equal  to  the  excess  of  the  price  of  the 
produce  of  the  land  over  the  cost  of  produr.tion  on  that  land. 
With  the  increase  of  population,  and  therefore  of  demand  for 
food,  inferior  soils  will  be  taken  into  cultivation ;  and  the 
price  of  the  entire  supply  necessary  for  the  community  will  be 
regulated  by  the  cost  of  production  of  that  portion  of  the 
supply  which  is  produced  at  the  greatest  expense.  But  for 
the  land  which  will  barely  repay  the  cost  of  cultivation  no 
rent  will  be  paid.  Hence  the  rent  of  any  quality  of  land  will 
be  equal  to  the  difference  between  the  cost  of  production  on 
that  land  and  the  cost  of  production  of  that  produce  which  is 
raised  at  the  greatest  expense. 

/  The  doctrine  is  perhaps  most  easily  apprehended  by  means 
of  the  supposition  here  made  of  the  coexistence  in  a  country 
of  a  series  of  soils  of  different  degrees  of  fertility  which  are 
successively  taken  into  cultivation  as  population  increases. 
But  it  would  be  an  error  to  believe,  though  Ricardo  some- 
times seems  to  imply  it,  that  such  difference  is  a  necessary 

1  Anderson's  account  of  the  origin  of  rent  is  reprinted  in  the  Select 
Collection  of  Scarce  and  Valuable  Economical  Tracts,  edited  £or  Lord 
Over-stone  by  J.  R.  M'Culloch,  1859. 


SYSTEM  OF  NATURAL  LIBERTY.  127 

condition  of  the  existence  of  rent.  If  all  the  land  of  a 
country  were  of  equal  fertility,  still  if  it  were  appropriated, 
and  if  the  price  of  the  produce  were  more  than  an  equivalent 
for  the  labour  and  capital  applied  to  its  production,  rent  would 
be  paid.  This  imaginary  case,  however,  after  using  it  to  clear  \ 
our  conceptions,  we  may  for  the  future  leave  out  of  account. 

The  price  of  produce  being,  as  we  have  said,  regulated  by 
the  cost  of  production  of  that  which  pays  no  rent,  it  is  evident 
that  "  corn  is  not  high,  because  a  rent  is  paid,  but  a  rent  is 
paid  because  corn  is  high,"  and  that  "  no  reduction  would  take 
place  in  the  price  of  corn  although  landlords  should  forego  the 
whole  of  their  rent."  Rent  is,  in  fact,  no  determining  element 
of  price;  it  is  paid,  indeed,  out  of  the  price,  but  the  price 
would  be  the  same  if  no  rent  were  paid,  and  the  whole  price 
were  retained  by  the  cultivator. 

It  has  often  been  doubted  whether  or  not  Adam  Smith 
held  this  theory  of  rent.  Sometimes  he  uses  language  which 
seems  to  imply  it,  and  states  propositions  which,  if  developed, 
would  infallibly  lead  to  it.  Thus  he  says,  in  a  passage 
already  quoted,  "  Such  parts  only  of  the  produce  of  land  can 
commonly  be  brought  to  market  of  which  the  ordinary  price 
is  sufficient  to  replace  the  stock  which  must  be  employed  in 
bringing  them  thither,  together  with  its  ordinary  profits.  If 
the  ordinary  price  is  more  than  this,  the  surplus  part  of  it 
will  naturally  go  to  the  rent  of  land.  If  it  is  not  more,  though 
th  >  commodity  can  be  brought  to  market,  it  can  afford  no  rent 
to  the  landlord.  Whether  the  price  is  or  is  not  more  depends 
on  the  demand."  Again,  in  Smith's  application  of  these  con- 
siderations to  mines,  "the  whole  principle  of  rent,"  Ricardo 
tells  us,  "  is  admirably  and  perspicuously  explained."  But  he 
had  formed  the  opinion  that  there  is  in  fact  no  land  which 
does  not  afford  a  rent  to  the  landlord ;  and,  strangely,  he 
seems  not  to  have  seen  that  this  appearance  might  arise  from 
the  aggregation  into  an  economic  whole  of  parcels  of  land 
which  can  and  others  which  cannot  pay  rent  The  truth, 
indeed,  is,  that  the  fact,  if  it  were  a  fact,  that  all  the  land 


128  POLITICAL  ECONOMY. 

in  a  country  pays  rent  would  be  irrelevant  as  an  argument 
against  the  Andersonian  theory,  for  it  is  the  same  thing  in 
substance  if  there  be  any  capital  employed  on  land  already 
cultivated  which  yields  a  return  no  more  than  equal  to  ordi- 
nary profits.  Such  last-employed  capital  cannot  afford  rent 
at  the  existing  rate  of  profit,  unless  the  price  of  produce 
should  rise. 

The  belief  which  some  have  entertained  that  Smith,  notwith- 
standing some  vague  or  inaccurate  expressions,  really  held  the 
Andersonian  doctrine,  can  scarcely  be  maintained  when  we 
remember  that  Hume,  writing  to  him  after  having  read  for 
the  first  time  the  Wealth  of  Nations,  whilst  expressing  general 
agreement  with  his  opinions,  said  (apparently  with  reference 
to  Bk.  I.  chap,  vii.),  "I  cannot  think  that  the  rent  of  farms 
makes  any  part  of  the  price  of  the  produce,  but  that  the  price 
is  determined  altogether  by  the  quantity  and  the  demand." 
It  is  further  noteworthy  that  a  statement  of  the  theory  of 
rent  is  given  in  the  same  volume,  published  in  1777,  which 
contains  Anderson's  polemic  against  Smith's  objections  to  a 
bounty  on  the  exportation  of  corn  ;  this  volume  can  hardly 
have  escaped  Smith's  notice,  yet  neither. by  its  contents  nor 
by  Hume's  letter  was  he  led  to  modify  what  he  had  said  in 
his  first  edition  on  the  subject  of  rent. 

;  It  must  be  remembered  that  not  merely  the  unequal  fertilities 
of  different  soils  will  determine  differences  of  rent ;  the  more 
'  or  less  advantageous  situation  of  a  farm  in  relation  to  markets, 
and  therefore  to  roads  and  railways,  will  have  a  similar  effect. 
Comparative  lowness  of  the  cost  of  transit  will  enable  the  pro- 
duce to  be  brought  to  market  at  a  smaller  expense,  and  will 
thus  increase  the  surplus  which  constitutes  rent.  This  con- 
sideration is  indicated  by  Eicardo,  though  he  does  not  give  it 
prominence,  but  dwells  mainly  on  the  comparative  produc- 
tiveness of  soils. 

Kent  is  defined  by  Ricardo  as  the  price  paid  for  the  use  of 
"the  original  and  indestructible  powers  of  the  soil."  He  thus 
differentiates  rent,  as  he  uses  the  term,  from  what  is  popularly 


SYSTEM  OF  NATURAL  LIBERTY.  129 

designated  by  the  word ;  and,  when  it  is  to  be  taken  in  hia 
sense,  it  is  often  qualified  as  the  "true"  or  "economic"  rent. 
Part  of  what  is  paid  to  the  landlord  is  often  really  profit  on 
his  expenditure  in  preparing  the  farm  for  cultivation  by  the 
tenant.  But  it  is  to  be  borne  in  mind  that  wherever  such 
improvements  are  "  amalgamated  with  the  land,"  and  "  add 
permanently  to  its  productive  powers,"  the  return  for  them 
follows  the  laws,  not  of  profit,  but  of  rent.  Hence  it  becomes 
difficult,  if  not.  impossible,  in  practice  to  discriminate  with 
any  degree  of  accuracy  the  amount  received  by  the  landlord 
"for  the  use  of  the  original  powers  of  the  soil"  from  the 
amount  received  by  him  as  remuneration  for  his  improve- 
ments or  those  made  by  his  predecessors.  These  have  raised 
the  farm,  as  an  instrument  for  producing  food,  from  one  class 
of  productiveness  to  a  higher,  and  the  case  is  the  same  as 
if  nature  had  originally  placed  the  land  in  question  in  that 
higher  class. 

Smith  had  treated  it  as  the  peculiar  privilege  of  agriculture, 
as  compared  with  other  forms  of  production,  that  in  it  "  nature 
labours  along  with  man,"  and  therefore,  whilst  the  workmen 
in  manufactures  occasion  the  reproduction  merely  of  the  capital 
which  employs  them  with  its  owner's  profits,  the  agricultural 
labourer  occasions  the  reproduction,  not  only  of  the  employer's 
capital  with  profits,  but  also  of  the  rent  of  the  landlord.  This 
last  he  viewed  as  the  free  gift  of  nature  which  remained  "  after 
deducting  or  compensating  everything  which  can  be  regarded 
as  the  work  of  man."  Kicardo  justly  observes  in  reply  that 
"  there  is  not  a  manufacture  which  can  be  mentioned  in  which 
nature  does  not  give  her  assistance  to  man."  He  then  goes 
on  to  quote  from  Buchanan  the  remark  that  "the  notion  of 
agriculture  yielding  a  produce  and  a  rent  in  consequence, 
because  nature  concurs  with  industry  in  the  process  of  culti- 
vation, is  a  mere  fancy.  It  is  not  from  the  produce,  but  from 
the  price  at  which  the  produce  is  sold,  that  the  rent  is  derived  ; 
and  this  price  is  got,  not  because  nature  assists  in  the  pro- 
duction, but  because  it  is  the  price  which  suits  the  consump- 

I 


130  POLITICAL  ECONOMY. 

tion  to  the  supply." l  There  is  no  gain  to  the  society  at  large 
from  the  rise  of  rent;  it  is  advantageous  to  the  landlords 
alone,  and  their  interests  are  thus  permanently  in  opposition 
to  those  of  all  other  classes.  The  rise  of  rent  may  be  retarded, 
or  prevented,  or  even  temporarily  changed  to  a  fall,  by  agricul- 
tural improvements,  such  as  the  introduction  of  new  manures 
or  of  machines  or  of  a  better  organisation  of  labour  (though 
there  is  not  so  much  room  for  this  last  as  in  other  branches 
of  production),  or  the  opening  of  new  sources  of  supply  in 
foreign  countries ;  but  the  tendency  to  a  rise  is  constant  so 
long  as  the  population  increases. 

The  great  importance  of  the  theory  of  rent  in  Ricardo's 
system  arises  from  the  fact  that  he  makes  the  general  eco- 
nomic condition  of  the  society  to  depend  altogether  on  the 
position  in  which  agricultural  exploitation  stands.  This  will 
be  seen  from  the  following  statement  of  his  theory  of  wages 
and  profits.  The  produce  of  every  expenditure  of  labour  and 
capital  being  divided  between  the  labourer  and  the  capitalist, 
in  proportion  as  one  obtains  more  the  other  will  neces- 
sarily obtain  less.  The  productiveness  of  labour  being  given, 
nothing  can  diminish  profit  but  a  rise  of  wages,  or  increase 
it  but  a  fall  of  wages.  "Now  the  price  of  labour,  being  the 
same  as  its  cost  of  production,  is  determined  by  the  price  of 
the  commodities  necessary  for  the  support  of  the  labourer. 
The  price  of  such  manufactured  articles  as  he  requires  has  a 
constant  tendency  to  fall,  principally  by  reason  of  the  pro- 
gressive application  of  the  division  of  labour  to  their  produc- 
tion. But  the  cost  of  his  maintenance  essentially  depends, 
not  on  the  price  of  those  articles,  but  on  that  of  his  food; 
and,  as  the  production  of  food  will  in  the  progress  of  society 

1  Senior,  however,  has  pointed  out  that  Smith  is  partly  right ;  whilst 
it  is  true  that  rent  is  demanded  because  the  productive  powers  of  nature 
are  limited,  and  increased  population  requires  a  less  remunerative  ex- 
penditure in  order  to  obtain  the  necessary  supply  ;  on  the  other  hand, 
it  is  the  power  which  most  land  possesses  of  producing  the  subsistence 
of  more  persons  than  are  required  for  its  cultivation  that  supplies  the 
fund  out  of  which  rent  can  be  paid. 


SYSTEM  OF  NATURAL  LIBERTY.  131 

and  of  population  require  the  sacrifice  of  more  and  more 
labour,  its  price  will  rise ;  money  wages  will  consequently 
rise,  and  with  the  rise  of  wages  profits  will  fall.  Thus  it  is 
to  the  necessary  gradual  descent  to  inferior  soils,  or  less  pro- 
ductive expenditure  on  the  same  soil,  that  the  decrease  in 
the  rate  of  profit  which  has  historically  taken  place  is  to  he 
attributed  (Smith  ascribed  this  decrease  to  the  competition  of 
capitalists,  though  in  one  place,  Book  I.  chap,  ix.,1  he  had 
a  glimpse  of  the  Eicardian  view).  This  gravitation  of  profits 
towards  a  minimum  is  happily  checked  at  times  by  improve- 
ments of  the  machinery  employed  in  the  production  of  neces- 
saries, and  especially  by  such  discoveries  in  agriculture  and 
other  causes  as  reduce  the  cost  of  the  prime  necessary  of  the 
labourer;  but  here  again  the  tendency  is  constant.  Whilst 
the  capitalist  thus  loses,  the  labourer  does  not  gain ;  his 
increased  money  wages  only  enable  him  to  pay  the  increased 
price  of  his  necessaries,  of  which  he  will  have  no  greater 
and  probably  a  less  share  than  he  had  before.  In  fact,_the 
labourer  can  never  for  any  considerable  time  earn  more  than 
what  is  required  to  enable  the  class  to  subsist  in  such  a 
degree  of  comfort  as  custom  ha&  made  indispensable  to  them, 
and  to  perpetuate  their  race  without  either  increase  or  dimi- 
nution. That  is  the  "  natural "  price  of  labour  •  and  if 
the  market  rate  temporarily  rises  above  it  population  will 
be  stimulated,  and  the  rate  of  wages  will  again  fall.  Thus 
whilst  rent  has  a  constant  tendency  to  rise  and  profit  to  fall, 
the  rise  or  fall  of  wages  will  depend  on  the  rate  of  increase 
of  the  working  classes.  For  the  improvement  of  their  con- 
dition Ricardo  thus  has  to  fall  back  on  the  Malthusian  remedy, 
of  the  effective  application  of  which  he  does  not,  however, 
seem  to  have  much  expectation.  The  securities  against  a 

1  "A*  the  colony  increases,  the  profits  of  stock  gradually  diminish. 
When  the  most  fertile  and  best  situated  lands  have  been  all  occupied, 
lesa  profit  can  be  made  by  the  cultivation  of  what  is  inferior  both  in  soil 
and  situation,  and  less  interest  can  be  afforded  for  the  stock  which  U  M 
employed."  The  view  in  question  had  been  anticipated  by  Weak 


I3«  POLITICAL  ECONOMY. 

superabundant  population  to  which  he  points  are  the  gradual 
abolition  of  the  poor-laws — for  their  amendment  would  not 
content  him — and  the  development  amongst  the  working 
classes  of  a  taste  for  greater  comforts  and  enjoyments. 

It  will  he  seen  that  the  socialists  have  somewhat  exagge- 
rated in  announcing,  as  Ricardo's  "  iron  law  "  of  wages,  their 
absolute  identity  with  the  amount  necessary  to  sustain  the 
existence  of  the  labourer  and  enable  him  to  continue  the  race. 
He  recognises  the  influence  of  a  "standard  of  living"  as  limit- 
ing  the  increase  of  the  numbers  of  the  working  classes,  and 
so  keeping  their  wages  above  the  lowest  point.  But  he  also 
holds  that,  in  long-settled  countries,  in  the  ordinary  course  of 
human  affairs,  and  in  the  absence  of  special  efforts  restricting 
the  growth  of  population,  the  condition  of  the  labourer  will 
decline  as  surely,  and  from  the  same  causes,  as  that  of  the 
landlord  will  be  improved. 

If  we  are  asked  whether  this  doctrine  of  rent,  and  the  con- 
sequences which  Bicardo  deduced  from  it,  are  true,  we  must 
answer  that  they  are  hypothetically  true  in  the  most  advanced 
industrial  communities,  and  there  only  (though  they  have 
been  rashly  applied  to  the  cases  of  India  and  Ireland),  but 
that  even  in  those  communities  neither  safe  inference  nor 
sound  action  can  be  built  upon  them.  As  we  shall  see  here- 
after, the  value  of  most  of  the  theorems  of  the  classical  eco- 
nomics is  a  good  deal  attenuated  by  the  habitual  assumptions 
that  we  are  dealing  with  "  economic  men,"  actuated  by  one 
principle  only  ;  that  custom,  as  against  competition,  has  no 
existence ;  that  there  is  no  such  thing  as  combination ;  that 
there  is  equality  of  contract  between  the  parties  to  each  trans- 
action, and  that  there  is  a  definite  universal  rate  of  profit  and 
wages  in  a  community;  this  last  postulate  implying  (i)  that 
the  capital  embarked  in  any  undertaking  will  pass  at  once  to 
another  in  which  larger  profits  are  for  the  time  to  be  made ; 
(2)  that  a  labourer,  whatever  his  local  ties  of  feeling,  family, 
habit,  or  other  engagements,  will  transfer  himself  immediately 
to  aay  place  where,  or  employment  in  which,  for  the  time, 


SYSTEM  OF  NATURAL  LIBERTY.  133 

larger  wages  are  to  be  earned  than  those  he  had  previously 
obtained ; 1  and  (3)  that  both  capitalists  and  labourers  have 
*  perfect  knowledge  of  the  condition  and  prospects  of  industry 
throughout  the  country,  both  in  their  own  and  other  occupa- 
tions. But  in  Ricardo's  speculations  on  rent  and  its  conse- 
quences there  is  still  more  of  abstraction.  The  influence  of 
emigration,  which  has  assumed  vast  dimensions  since  his  time, 
is  left  out  of  account,  and  the  amount  of  land  at  the  disposal 
of  a  community  is  supposed  limited  to  its  own  territory,  whilst 
contemporary  Europe  is  in  fact  largely  fed  by  the  western 
States  of  America.  He  did  not  adequately  appreciate  the 
degree  in  which  the  augmented  productiveness  of  labour, 
whether  from  increased  intelligence,  improved  organisation, 
introduction  of  machinery,  or  more  rapid  and  cheaper  com- 
munication, steadily  keeps  down  the  cost  of  production.  To 
these  influences  must  be  added  those  of  legal  reforms  in 
tenure,  and  fairer  conditions  in  contracts,  which  operate  in 
the  same  direction.  As  a  result  of  all  these  causes,  the  pres- 
sure anticipated  by  Ricardo  is  not  felt,  and  the  cry  is  of  the 
landlords  over  falling  rents,  not  of  the  consumer  over  rising 
prices.  The  entire  conditions  are  in  fact  so  altered  that 
Professor  Nicholson,  no  enemy  to  the  "  orthodox  "  economics, 
when  recently  conducting  an  inquiry  into  the  present  state  of 
the  agricultural  question,2  pronounced  the  so-called  Ricardian 
theory  of  rent  "too  abstract  to  be  of  practical  utility." 

A  particular  economic  subject  on  which  Ricardo  has  thrown 
a  useful  light  is  the  nature  of  the  advantages  derived  from 
foreign  commerce,  and  the  conditions  under  which  such  com- 
merce can  go  on.  Whilst  preceding  writers  had  represented 
those  benefits  as  consisting  in  affording  a  vent  for  surplus 
produce,  or  enabling  a  portion  of  the  national  capital  to  re- 
place itself  with  a  profit,  he  pointed  out  that  they  consist 

1  Adam  Smith  says  : — "It  appears  evidently  from  experience  that  man 
is,  of  all  sorts  of  luggage,  the  most  difficult  to  be  transported  "  ( Wealth 
of  Nations,  Bk.  I.  chap.  viii. ). 

J  Tenant's  Gain  not  Landlord's  Loss  (1883),  p.  83. 


134  POLITICAL  ECONOMY. 

"  simply  and  solely  in  this,  that  it  enables  each  nation  t« 
obtain,  with  a  given  amount  of  labour  and  capital,  a  greater 
quantity  of  all  commodities  taken  together."  This  is  no  doubt 
the  point  of  view  at  which  we  should  habitually  place  our- 
selves ;  though  the  other  forms  of  expression  employed  by  his 
predecessors,  including  Adam  Smith,  are  sometimes  useful  as 
representing  real  considerations  affecting  national  production, 
and  need  not  be  absolutely  disused.  Ricardo  proceeds  to 
show  that  what  determines  the  purchase  of  any  commodity 
from  a  foreign  country  is  not  the  circumstance  that  it  can  be 
produced  there  with  less  labour  and  capital  than  at  home. 
If  we  have  a  greater  positive  advantage  in  the  production  of 
some  other  article  than  in  that  of  the  commodity  in  question, 
even  though  we  have  an  advantage  in  producing  the  latter, 
it  may  be  our  interest  to  devote  ourselves  to  the  production 
of  that  in  which  we  have  the  greatest  advantage,  and  to  im- 
port that  in  producing  which  we  should  have  a  less,  though  a 
real,  advantage.  It  is,  in  short,  not  absolute  cost  of  produc- 
tion, but  comparative  cost,  which  determines  the  interchange. 
This  remark  is  just  and  interesting,  though  an  undue  import- 
ance seems  to  be  attributed  to  it  by  J.  S.  Mill  and  Cairnes, 
the  latter  of  whom  magniloquently  describes  it  as  "  sounding 
the  depths  "  of  the  problem  of  international  dealings, — though, 
as  we  shall  see  hereafter,  he  modifies  it  by  the  introduction 
of  certain  considerations  respecting  the  conditions  of  domestic 
production. 

For  the  nation  as  a  whole,  according  to  Kicardo,  it  is  not 
_  the  gross  produce  of  the  land  and  labour,  as  Smith  seems  to 
assert,  that  is  of  importance,  but  the  net  income — the  excess, 
that  is,  of  this  produce  over  the  cost  of  production,  or,  in 
other  words,  the  amount  of  its  rent  and  its  profits ;  for  the 
wages  of  labour,  not  essentially  exceeding  the  maintenance 
of  the  labourers,  are  by  him  considered  only  as  a  part  of  the 
"  necessary  expenses  of  production."  Hence  it  follows,  as  he 
himself  in  a  characteristic  and  often-quoted  passage  says,  that, 
"  provided  the  net  real  income  of  the  nation  be  the  same,  it 


SYSTEM  OF  NATURAL  LIBERTY.  135 

is  of  no  importance  whether  it  consists  of  ten  or  twelve 
millions  of  inhabitants.  If  five  millions  of  men  could  pro- 
duce as  much  food  and  clothing  as  was  necessary  for  ten 
millions,  food  and  clothing  for  five  millions  would  be  the  net 
revenue.  Would  it  be  of  any  advantage  to  the  country  that  to 
produce  this  same  net  revenue  seven  millions  of  men  should 
be  required, — that  is  to  say,  that  seven  millions  should  be 
employed  to  produce  food  and  clothing  sufficient  for  twelve 
millions?  The  food  and  clothing  of  five  millions  would  be 
still  the  net  revenue.  The  employing  a  greater  number  of 
men  would  enable  us  neither  to  add  a  man  to  our  army  and 
navy  nor  to  contribute  one  guinea  more  in  taxes."  Industry 
is  here  viewed,  just  as  by  the  mercantilists,  in  relation  to  the 
military  and  political  power  of  the  state,  not  to  the  maintenance 
and  improvement  of  human  beings,  as  its  end  and  aim.  The 
labourer,  as  Held  has  remarked,  is  regarded  not  as  a  member 
of  society,  but  as  a  means  to  the  ends  of  society,  on  whose 
sustenance  a  part  of  the  gross  income  must  be  expended,  as 
another  part  must  be  spent  on  the  sustenance  of  horses.  We 
may  well  ask,  as  Sismondi  did  in  a  personal  interview  with 
Kicardo,  "What!  is  wealth  then  everything?  are  men  abso- 
lutely nothing  ?" 

On  the  whole  what  seems  to  us  true  of  Ricardo  is  this,  that, 
whilst  he  had  remarkable  powers,  they  were  not  the  powers 
best  fitted  for  sociological  research.  Nature  intended  him 
rather  for  a  mathematician  of  the  second  order  than  for  a 
social  philosopher.  Nor  had  he  the  due  previous  preparation 
for  social  studies  ;  for  we  must  decline  to  accept  Bagehot's 
idea  that,  though  "  in  no  high  sense  an  educated  man,"  he 
had  a  specially  apt  training  for  such  studies  in  his  practice  as 
an  eminently  successful  dealer  in  stocks.  The  same  writer 
justly  notices  the  "  anxious  penetration  with  which  he  follows 
out  rarefied  minutiae."  But  he  wanted  breadth  of  survey,  a 
comprehensive  view  of  human  nature  and  human  life,  and 
the  strong  social  sympathies  which,  as  the  greatest  minds  have 
recognised,  are  a  most  valuable  aid  in  this  department  of  study. 


136  POLITICAL  ECONOMY. 

On  a  subject  like  that  of  money,  where  a  few  elementary  pro- 
positions— into  which  no  moral  ingredient  enters — have  alone 
to  be  kept  in  view,  he  was  well  adapted  to  succeed ;  but  in 
the  larger  social  field  he  is  at  fault.  He  had  great  deductive 
readiness  and  skill  (though  his  logical  accuracy,  as  Mr.  Sidg- 
wick  remarks,  has  been  a  good  deal  exaggerated).  But  in 
human  affairs  phenomena  are  so  complex,  and  piinciples  so 
constantly  limit  or  even  compensate  one  another,  that  rapidity 
and  daring  in  deduction  may  be  the  greatest  of  dangers,  if 
they  are  divorced  from  a  wide  and  balanced  appreciation  of 
facts.  Dialectic  ability  is,  no  doubt,  a  valuable  gift,  but  the 
first  condition  for  success  in  social  investigation  is  to  see 
things  as  they  are. 

A  sort  of  Eicardo-mythus  for  some  time  existed  in  eco- 
nomic circles.  It  cannot  be  doubted  that  the  exaggerated 
estimate  of  his  merits  arose  in  part  from  a  sense  of  the  support 
his  system  gave  to  the  manufacturers  and  other  capitalists  in 
their  growing  antagonism  to  the  old  aristocracy  of  landowners. 
The  same  tendency,  as  well  as  his  affinity  to  their  too  abstract 
and  unhistorical  modes  of  thought,  and  their  eudaemonistic 
doctrines,  recommended  him  to  the  Benthamite  group,  and 
to  the  so-called  Philosophical  Radicals  generally.  Brougham 
said  he  seemed  to  have  dropped  from  the  skies — a  singular 
avatar,  it  must  be  owned.  His  real  services  in  connection 
with  questions  of  currency  and  banking  naturally  created  a 
prepossession  in  favour  of  his  more  general  views.  But, 
apart  from  those  special  subjects,  it  does  not  appear  that, 
either  in  the  form  of  solid  theoretic  teaching  or  of  valuable 
practical  guidance,  he  has  really  done  much  for  the  world, 
whilst  he  admittedly  misled  opinion  on  several  important 
questions.  De  Quincey's  presentation  of  him  as  a  great 
revealer  of  truth  is  now  seen  to  be  an  extravagance.  J.  S. 
Mill  and  others  speak  of  his  "superior  lights  "as  compared 
with  those  of  Adam  Smith ;  but  his  work,  as  a  contribution 
to  our  knowledge  of  human  society,  will  not  bear  a  moment'* 
comparison  with  the  Wealth  of  Nations. 


SYSTEM  OF  NATURAL  LIBERTY.  137 

It  is  interesting  to  observe  that  Malthus,  though  the  com- 
bination of  his  doctrine  of  population  with  the  principles  of 
Ricardo  composed  the  creed  for  some  time  professed  by  all  the 
"  orthodox  "  economists,  did  not  himself  accept  the  Ricardian 
scheme.  He  prophesied  that  "  the  main  part  of  the  structure 
would  not  stand."  "  The  theory,"  he  says,  "  takes  a  partial 
view  of  the  subject,  like  the  system  of  the  French  economists ; 
and,  like  that  system,  after  having  drawn  into  its  vortex  a 
great  number  of  very  clever  men,  it  will  be  unable  to  support 
itself  against  the  testimony  of  obvious  facts,  and  the  weight 
of  those  theories  which,  though  less  simple  and  captivating, 
are  more  just,  on  account  of  their  embracing  more  of  the  causes 
which  are  in  actual  operation  in  all  economical  results." 

We  saw  that  the  foundations  of  Smith's  doctrine  in  general 
philosophy  were  unsound,  and  the  ethical  character  of  his 
scheme  in  consequence  injuriously  affected ;  but  his  method, 
consisting  in  a  judicious  combination  of  induction  and  deduc- 
tion, we  found  (so  far  as  the  statical  study  of  economic  laws 
is  concerned)  little  open  to  objection.  Mainly  through  the 
influence  of  Ricardo,  economic  method  was  perverted.  The 
science  was  led  into  the  mistaken  course  of  turning  its  back 
on  observation,  and  seeking  to  evolve  the  laws  of  phenomena 
out  of  a  few  hasty  generalisations  by  a  play  of  logic.  The 
principal  vices  which  have  been  in  recent  times  not  unjustly 
attributed  to  the  members  of  the  "  orthodox  "  school  were  all 
encouraged  by  his  example,  namely, — (i)  the  viciously  abstract 
character  of  the  conceptions  with  which  they  deal,  (2)  the 
abusive  preponderance  of  deduction  in  their  processes  of  re- 
starch,  and  (3)  the  too  absolute  way  in  which  their  conclu- 
sions are  conceived  and  enunciated. 

The  works  of  Ricardo  have  been  collected  in  one  volume, 
with  a  biographical  notice,  by  J.  R.  M'Culloch  (I846).1 

1  A  sketch  of  Ricardo's  personal  history,  and  an  account  of  his  writ- 
ings on  monetary  questions,  which  could  not  conveniently  be  introduced 
here,  will  be  found  under  his  name  in  the  Encyclopaedia  £ritannieat  9th 
edition. 


138  POLITICAL  ECONOMY. 

After  Malthus  and  Ricardo,  the  first  of  whom  had  fixed 
public  attention  irresistibly  on  certain  aspects  of  society,  and 
the  second  had  led  economic  research  into  new,  if  questionable, 
paths,  came  a  number  of  minor  writers  who  were  mainly  their 
expositors  and  commentators,  and  whom,  accordingly,  the 
Germans,  with  allusion  to  Greek  mythical  history,  designate 
as  the  Epigoni.  By  them  the  doctrines  of  Smith  and  hi« 
earliest  successors  were  thrown  into  more  systematic  shape, 
limited  and  guarded  so  as  to  be  less  open  to  criticism,  couched 
in  a  more  accurate  terminology,  modified  in  subordinate  par- 
ticulars, or  applied  to  the  solution  of  the  practical  questions 
of  their  day. 

James  Mill's  Elements  (1821)  deserves  special  notice,  as 
exhibiting  the  system  of  Ricardo  with  thorough-going  rigour, 
and  with  a  compactness  of  presentation,  and  a  skill  in  the 
disposition  of  materials,  which  give  to  it  in  some  degree  the 
character  of  a  work  of  art.  The  a  priori  political  economy 
is  here  reduced  to  its  simplest  expression.  J.  R.  M'Cullouh 
(1779-1864),  author  of  a  number  of  laborious  statistical  and" 
other  compilations,  criticised  current  economic  legislation  in 
the  Edinburgh  Review  from  the  point  of  view  of  the  Ricardian 
doctrine,  taking  up  substantially  the  same  theoretic  position 
as  was  occupied  at  a  somewhat  later  period  by  the  Manchester 
school.  He  is  altogether  without  originality,  aud  never 
exhibits  any  philosophic  elevation  or  breadth.  His  confident 
dogmatism  is  often  repellent ;  he  admitted  in  his  later  years 
that  he  had  been  too  fond  of  novel  opinions,  and  defended 
them  with  more  heat  and  pertinacity  than  they  deserved.  It 
is  noticeable  that,  though  often  spoken  of  in  his  own  time 
both  by  those  who  agreed  with  his  views,  and  those,  like 
Sismondi,  who  differed  from  them,  as  one  of  the  lights  of 
the  reigning  school,  his  name  is  now  tacitly  dropped  in  the 
writings  of  the  members  of  that  school.  Whatever  may  have 
been  his  partial  usefulness  in  vindicating  the  policy  of  free 
trade,  it  is  at  least  plain  that  for  the  needs  of  our  social  future 
he  has  nothing  to  olfer.  Nassau  William  Senior  (1790-1864), 


SYSTEM  OF  NATURAL  LIBERTY.  139 

who  was  professor  of  political  economy  in  the  university  of 
Oxford,  published,  besides  a  number  of  separate  lectures,  a 
treatise  on  the  science,  which  first  appeared  as  an  article  in 
the  Encyclopaedia  Metropolitana.  He  is  a  writer  of  a  high 
order  of  merit.  He  made  considerable  contributions  to  the 
elucidation  of  economic  principles,  specially  studying  exact- 
ness in  nomenclature  and  strict  accuracy  in  deduction.  His  N 
explanations  on  cost  of  production  and  the  way  in  which  it 
affects  price,  on  rent,  on  the  difference  between  rate  of  wages  / 
and  price  of  labour,  on  the  relation  between  profit  and  wages  j 
(with  special  reference  to  Ricardo's  theorem  on  this  subject, 
which  he  corrects  by  the  substitution  of  proportional  for  / 
absolute  amount),  and  on  the  distribution  of  the  precious 
metals  between  different  countries,  are  particularly  valuable./- 
His  new  term  "  abstinence,"  invented  to  express  the  conduct 
for  which  interest  is  the  remuneration,  was  useful,  though 
not  quite  appropriate,  because  negative  in  meaning.  It  is  on 
the  theory  of  wages  that  Senior  is  least  satisfactory.  j^e_ 
makes  the  average  rate  in  a  country  (which,  we  must  main- 
tain, is  not  a  real  quantity,  though  the  rate  in  a  given  employ- 
ment and  neighbourhood  is)  to  be  expressed  by  the  fraction 
of  which  the  numerator  is  the  amount  of  the  wages  fund  (an 
unascertainable  and  indeed,  except  as  actual  total  of  wages 
paid,  imaginary  sum)  and  the  denominator  the  number  of  the 
working  population ;  and  from  this  he  proceeds  to  draw  the 
most  important  and  far-reaching  consequences,  though  the 
equation  on  which  he  founds  his  inferences  conveys  at  most 
only  an  arithmetical  fact,  which  would  be  true  of  every  case 
of  a  division  amongst  individuals,  and  contains  no  economic 
element  whatever.  The  phrase  "  wages  fund"  originated  in 
gome  expressions  of  Adam  Smith l  used  only  for  the  purpose 
of  illustration,  and  never  intended  to  be  rigorously  interpreted; 

1  Thus,  in  Wealth  of  Nations,  Bk.  I.  chap,  viii.,  we  have  the  phrases — 
"  the  funds  which  are  destined  to  the  payment  of  wages,"  "  the  f uiuii 
destined  for  employing  industry  "  "  the  funds  destined  for  the  mainte- 
nance of  servants." 


I4o  POLITICAL  ECONOMY. 

and  we  shall  see  that  the  doctrine  has  been  repudiated  bj 
several  members  of  what  is  regarded  as  the  orthodox  school 
of  political  economy.  As  regards^jnethod,  Senior  makes  the 
science  a  purely  dedmtive  one,  in  which  there  is  no  room 
for  any  other  "facts  than  the  four  fundamental  propositions 
from  which  he  undertakes  to  deduce  all  economic  truth.  And 
he  does  not  regard  himself  as  arriving  at  hypothetic  conclu- 
sions ;  his  postulates  and  his  inferences  are  alike  conceived  as 
corresponding  to  actual  phenomena.1  Colonel, Robert  Torrens 
(1780-1864)  was  a  prolific  writer,  partly  on  economic  theory, 
but  principally  on  its  applications  to  financial  and  commercial 
policy.  Almost  the  whole  of  the  programme  which  was 
carried  out  in  legislation  by  Sir  Eobert  Peel  had  been  laid 
down  in  principle  in  the  writings  of  Torrens.  He  gave  sub- 
stantially the  same  theory  of  foreign  trade  which  was  after- 
wards stated  by  J.  S.  Mill  in  one  of  his  Essays  on  Unsettled 
Questions?  He  was  an  early  and  earnest  advocate  of  the 
repeal  of  the  corn  laws,  but  was  not  in  favour  of  a  general 
system  of  absolute  free  trade,  maintaining  that  it  is  expedient 
to  impose  retaliatory  duties  to  countervail  similar  duties  im- 
posed by  foreign  countries,  and  that  a  lowering  of  import 
duties  on  the  productions  of  countries  retaining  their  hostile 
tariffs  would  occasion  an  abstraction  of  the  precious^jii e tals, 
and  a  decline  in  prices,  profits,  and  wages.  His  principal 
writings  of  a  general  character  were — The  Economist  [i.e., 
Physiocrat]  Refuted,  1808;  Essay  on  the  Production  oj 
Wealth,  1821  ;  Essay  on  the  External  Corn-trade  (eulogised  by 
Kicardo),  3d  ed.,  1826  ;  The  Budget,  a  Series  of  Letters  on 
Financial,  Commercial,  and  Colonial  Policy,  1841-3.  Harriot 
Martineau  (1802-1876)  popularised  the  doctrines  of  Malthas 
and  Kicardo  in  her  Illustrations  of  Political  Economy  (1832- 

*  See  the  last  of  his  Four  Introductory  Lectures  on  Political  Economy, 
1852. 

2  Mill,  however,  tells  us  in  his  Preface  to  those  Essays  that  his  own 
views  on  that  subject  had  been  entertained  and  committed  to  writing 
before  the  publication  by  Torrent)  of  similar  opinion*. 


SYSTEM  OF  NATURAL  LIBERTY.  141 

34),  a  series  of  tales,  in  which  there  is  much  excellent  descrip- 
tion, but  the  effect  of  the  narrative  is  often  marred  by  the 
somewhat  ponderous  disquisitions  here  and  there  thrown  in, 
usually  in  the  form  of  dialogue. 

Other  writers  who  ought  to  be  named  in  any  history  of  the 
science  are  Charles  Babbage,  On  the  Economy  of  Machinery 
and  Manufactures  (1832),  chiefly  descriptive,  but  also  in  part 
theoretic ;  William  Thomas  Thornton,  Overpopulation  and  its 
Remedy  (1846),  A  Plea  for  Peasant  Proprietors  (1848),  On 
Labour  (1869  ;  2d  ed.,  1870) ;  Herman  Merivale,  Lectures  on 
Colonisation  and  Colonies  (1841—2;  new  ed.,  1861);  T.  C. 
Banfield,  The  Organisation  of  Industry  Explained  (1844;  2d 
ed.,  1848);  and  Edward  Gibbon  Wakefield,  A  View  of  the 
Art  of  Colonisation  (1849).  Thomas  Chalmers,  well  known  in  -4- 
other  fields  of  thought,  was  author  of  The  Christian  and  Civic 
Economy  of  Large  Towns  (1821—36),  and  On  Political  Eco- 
nomy in  Connection  with  the  Moral  State  and  Moral  Prospects 
of  Society  (1832);  he  strongly  opposed  any  system  of  legai 
charity,  and,  whilst  justly  insisting  on  the  primary  importance 
of  morality,  industry,  and  thrift  as  conditions  of  popular  well- 
being,  carried  the  Malthusian  doctrines  to  excess.  Nor  was 
Ireland  without  a  share  in  the  economic  movement  of  the 
period.1  Whately,  having  been  second  Drummond  professor  -4— 
of  political  economy  at  Oxford  (in  succession  to  Senior),  and 
delivered  in  that  capacity  his  Introductory  Lectures  (1831), 
founded  in  1832,  when  he  went  to  Ireland  as  archbishop  of 
Dublin,  a  similar  professorship  in  Trinity  College,  Dublin. 
It  was  first  held  by  Mountifort  Longfield,  afterwards  Judge 
of  the  Landed  Estates  Court,  Ireland  (d.  1884).  He  published 

1  Samuel  Crumpe,  M.D.,  had  published  at  Dublin  in  1793  an  Essay  on 
the  Best  Means  of  Providiny  Employment  for  the  People,  which  obtained 
a  prize  offered  by  the  Royal  Irish  Academy  for  the  best  dissertation  on 
that  subject.  Thia  is  a  meritorious  work,  and  contains  a  good  state- 
ment of  some  of  the  leading  principles  of  Adam  Smith.  John  Hely 
Hutchinson's  Commercial  Restraints  of  Ireland  (i779)  i8  important  foi 
the  economic  history  of  that  country. 


142  POLITICAL  ECONOMY. 

lectures  on  the  science  generally  (1834),  on  Poor  Laws  (1834), 
.  and  on  Commerce  and  Absenteeism  (1835),  which  were  marked 
by  independence  of  thought  and  sagacious  observation.  He 
was  laudably  free  from  many  of  the  exaggerations  of  his  con- 
temporaries; he  said,  in  1835,  "in  political  economy  we  must 
not  abstract  too  much,"  and  protested  against  the  assumption 
commonly  made  that  "  men  are  guided  in  all  their  conduct  by 
a  prudent  regard  to  their  own  interest."  James  A.  Lawson 
(afterwards  Mr.  Justice  Lawson,  d.  1887)  also  published 
some  lectures  (1844),  delivered  from  the  same  chair,  which 
may  still  be  read  with  interest  and  profit;  his  discussion  of 
the  question  of  population  is  especially  good ;  he  also  asserted 
against  Senior  that  the  science  is  avide  de  faits,  and  that  it 
must  reason  about  the  world  and  mankind  as  they  really  are. 

The  most  systematic  and  thorough-going  of  the  earlier  critics 
of  the  Ricardian  system  was  Richard  Jones  (1790-1855),  pro- 
fessor at  Haileybury.     Jones  has  received  scant  justice  at  the 
hands  of  his  successors.     J.  S.  Mill,  whilst  using  his  work, 
gave  his  merits  but  faint  recognition.      Even  Roscher  says 
that  he  did  not  thoroughly  understand  Ricardo,  without  giving 
any  proof  of  that  assertion,  whilst  he  is  silent  as  to  the  fact 
that  much  of  what   has  been   preached  by  the  German  his- 
torical school  is  found  distinctly  indicated  in  Jones's  writings. 
He  has  been  sometimes  represented  as  having  rejected  the 
Andersonian  doctrine  of  rent ;  but  such  a  statement  is  in- 
correct.    Attributing  the  doctrine   to  Malthus,  he  says  that 
\   that  economist  "showed  satisfactorily  that  when  land  is  culti- 
\  vated  by  capitalists  living  on  the  profits  of  their  stock,  and 
S  able  to  move  it  at  pleasure  to  other  employments,  the  expense 
~Y\  of  tilling  the  worst  quality  of  land  cultivated  determines  the 
j  average  price  of  raw  produce,  while  the  difference  of  quality 
(  of  the  superior  lands  measures  the  rents  yielded  by  them." 
What  he  really  denied  was  the  application  of  the  doctrine  to 
all  cases  where  rent  is  paid ;  he  pointed  out  in  his  Essay  on 
the  Distribution  of  Wealth  and  on  the  Sources  of  Taxation, 
1831,  that,  besides  "  farmers'  rents,"  which,  under  the  supposed 


SYSTEM  OF  NATURAL  LIBERTY. 


'43 


conditions,   conform  to   the  above   law,   there  aie   "  peasant 
rents,"  paid  everywhere  through  the  most  extended  periods 
of  history,  and  still  paid  over  by  far  the  largest  part  of  the 
earth's  surface,  which  are  not  so  regulated.     Peasant  rents  he 
divided  under  the  heads  of  (i)  serf^(2)  metayer,  (3)  ryot,  and 
(4)  cottier  rents,  a  classification  afterwards  adopted  in  sub- 
stance by  J.  S.  Mill ;  and  he  showed  that  the  contracts  fixing 
their  amount  were,  at  least  in  the  first  three  classes,  deter- 
mined rather  by  custom  than  by  competition.     Passing  to  the 
superstructure  of  theory  erected  by  Ricardo  on  the  doctrine  of 
rent  which  he  had  so  unduly  extended,  Jones  denied  most  of 
the  conclusions  he  had  deduced,  especially  the  following : — 
that   the   increase  of  farmers'   rents   is  always  contemporary  i\ 
with  a  decrease  in  the  productive  powers  of  agriculture,  and  2-  } 
comes  with  loss  and  distress  in  its  train  ;  that  the  jnterestsof  3  / 
landlords  are  always  and  necessarily  opposed  to  the  interests     / 
of  the  state  and  of  every  other  class  of  society;  that  the  diminu-    V 
tion  of  the_£ate^  of  profits  is  exclusively  dependent  on  the    / 
returns  to  the  capital  last  employed  on  the  land;  and  that   1 
wages  can,  ji§e_only  atthejsxpense  of  profits.  J 

The  method  followed  by  Jones  is  inductive;  his  conclu- 
sions are  founded  on  a  wide  observation  of  contemporary  facts, 
aided  by  the  study  of  history.  "  If,"  he  said,  "  we  wish  to 
make  ourselves  acquainted  with  the  economy  and  arrange- 
ments by  which  the  different  nations  of  the  earth  produce  and 
distribute  their  revenues,  I  really  know  but  of  one  way  to 
attain  our  object,  and  that  is,  to  look  and  see.  We  must  get 
comprehensive  views  of  facts,  that  we  may  arrive  at  principles 
that  are  truly  comprehensive.  If  we  take  a  different  method, 
if  we  snatch  at  general  principles,  and  content  ourselves  with 
confined  observations,  two  things  will  happen  to  us.  First, 
what  we  call  general  principles  will  often  be  found  to  have  no 
generality — we  shall  set  out  with  declaring  propositions  to  be 
universally  true  which,  at  every  step  of  our  further  progress, 
we  shall  be  obliged  to  confess  are  frequently  false ;  and, 
secondly,  we  shall  miss  a  great  mass  of  useful  knowledge  which 


144  POLITICAL  ECONOMY. 

those  who  advance  to  principles  by  a  comprehensive  examina 
tion  of  facts  necessarily  meet  with  on  their  road."  The  world 
he  professed  to  study  was  not  an  imaginary  world,  inhabited 
by  abstract  "economic  men,"  but  the  real  world  with  the 
different  forms  which  the  ownership  and  cultivation  of  land, 
and,  in  general,  the  conditions  of  production  and  distribution, 
assume  at  different  times  and  places.  His  recognition  of  such 
different  systems  of  life  in  communities  occupying  different 
stages  in  the  progress  of  civilisation  led  to  his  proposal  of  what 
he  called  a  "  political  economy  of  nations."  This  was  a  protest 
against  the  practice  of  taking  the  exceptional  state  of  facts 
which  exists,  and  is  indeed  only  partially  realised,  in  a  small 
corner  of  our  planet  as  representing  the  uniform  type  of 
human  societies,  and  ignoring  the  effects  of  the  early  history 
and  special  development  of  each  community  as  influencing  its 
economic  phenomena. 

It  is  sometimes  attempted  to  elude  the  necessity  for  a 
wider  range  of  study  by  alleging  a  universal  tendency  in  the 
social  world  to  assume  this  now  exceptional  shape  as  its 
normal  and  ultimate  constitution.  Even  if  this  tendency 
were  real  (which  is  only  partially  true,  for  the  existing  order 
amongst  ourselves  cannot  be  regarded  as  entirely  definitive), 
it  could  not  be  admitted  that  the  facts  witnessed  in  out 
civilisation  and  those  exhibited  in  less  advanced  communities 
are  so  approximate  as  to  be  capable  of  being  represented  by 
the  same  formulae.  As  Whewell,  in  editing  Jones's  Remains, 
1859,  well  observed,  it  is  true  in  the  physical  world  that  "all 
things  tend  to  assume  a  form  determined  by  the  force  of 
gravity ;  the  hills  tend  to  become  plains,  the  waterfalls  to  eat 
away  their  beds  and  disappear,  the  rivers  to  form  lakes  in 
the  valleys,  the  glaciers  to  pour  down  in  cataracts."  But  are 
we  to  treat  these  results  as  achieved,  because  forces  are  in 
operation  which  may  ultimately  bring  them  about  ?  All  human 
questions  are  largely  questions  of  time ;  and  the  economic 
phenomena  which  really  belong  to  the  several  stages  of  the 
human  movement  must  be  studied  as  they  are,  unless  we  are  con- 


SYSTEM  OF  NATURAL  LIBERTY.  145 

tent  to  fall  into  grievous  error  both  in  our  theoretic  treatment  of 
them  and  in  the  solution  of  the  practical  problems  they  present. 

Jones  is  remarkable  for  his  freedom  from  exaggeration  and 
one-sided  statement ;  thus,  whilst  holding  Malthus  in,  perhaps, 
undue  esteem,  he  declines  to  accept  the  proposition  that  atf) 
increase  of  the  means  of  subsistence  is  necessarily  followed  byA 
an  increase  of  population;  and  he  maintains  what  is  undoubtedly*] 
true,  that  with  the  growth  of  population,  in  all  well-governed 
and  prosperous  states,   the   command   over  food,  instead  of 
diminishing,  increases. 

Much  of  what  he  has  left  us — a  large  part  of  which  is  un- 
fortunately fragmentary — is  akin  to  the  labours  of  Cliffe  Leslie 
at  a  later  period.  The  latter,  however,  had  the  advantage  of 
acquaintance  with  the  sociology  of  Comte,  which  gave  him  a 
firmer  grasp  of  method,  as  well  as  a  wider  view  of  the  general 
movement  of  society  ;  and,  whilst  the  voice  of  Jones  was  but 
little  heard  amidst  the  general  applause  accorded  to  Ricardo  in 
the  economic  world  of  his  time,  Leslie  wrote  when  disillusion 
had  set  in,  and  the  current  was  beginning  to  turn  in  England 
against  the  a  priori  economics. 

Comte  somewhere  speaks  of  the  "transient  predilection" 
for  political  economy  which  had  shown  itself  generally  in 
western  Europe.  This  phase  of  feeling  was  specially  notice- 
able in  England  from  the  third  to  the  fifth  decade  of  the 
present  century.  "Up  to  the  year  1818,"  said  a  writer  in 
the  Westminster  Review,  "  the  science  was  scarcely  known  or 
talked  of  beyond  a  small  circle  of  philosophers  ;  and  legislation, 
so  far  from  being  in  conformity  with  its  principles,  was  daily 
receding  from  them  more  and  more."  Mill  has  told  us  what 
a  change  took  place  within  a  few  years.  "  Political  economy," 
ho  says,  "  had  asserted  itself  with  great  vigour  in  public 
affairs  by  the  petition  of  the  merchants  of  London  for  free 
trade,  drawn  up  in  1820  by  Mr.  Tooke  and  presented  by 
Mr.  Alexander  Baring,1  and  by  the  noble  exertions  of  Ricardo 

1  Afterwards  Lord  Ashburton.     For  this   Petition,  see    M'Cullocb'f 

I 


146  POLITICAL  ECONOMY. 

during  the  few  years  of  his  parliamentary  life.  Ilia  writing^ 
following  up  the  impulse  given  by  the  bullion  controversy, 
and  followed  up  in  their  turn  by  the  expositions  and  com- 
ments of  my  father  and  M'Culloch  (whose  writings  in  the 
Edinburgh  Review  during  those  years  were  most  valuable),  had 
drawn  general  attention  to  the  subject,  making  at  least  partial 
converts  in  the  Cabinet  itself ;  and  Huskisson,  supported 
by  Canning,  had  commenced  that  gradual  demolition  of  the 
protective  system  which,  one  of  their  colleagues  virtually 
completed  in  1846,  though  the  last  vestiges  were  only  swept 
away  by  Mr.  Gladstone  in  1860."  Whilst  the  science  was 
thus  attracting  and  fixing  the  attention  of  active  minds,  its 
unsettled  condition  was  freely  admitted.  The  differences 
of  opinion  among  its  professors  were  a  frequent  subject  of 
complaint.  But  it  was  confidently  expected  that  these  discre- 
pancies would  soon  disappear,  and  Colonel  Torrens  predicted 
that  in  twenty  years  there  would  scarcely  "  exist  a  doubt 
respecting  any  of  its  more  fundamental  principles."  "  The 
prosperity,"  says  Mr.  Sidgwick,  "  that  followed  on  the  aboli- 
tion of  the  corn  laws  gave  practical  men  a  most  impressive  and 
satisfying  proof  of  the  soundness  of  the  abstract  reasoning  by 
which  the  expediency  of  free  trade  had  been  inferred,"  and 
when,  in  1848,  "a  masterly  expositor  of  thought  had  published 
a  skilful  statement  of  the  chief  results  of  the  controversies 
of  the  preceding  generation,"  with  the  due  "  explanations  and 
qualifications  "  of  the  reigning  opinions,  it  was  for  some  years 
generally  believed  that  political  economy  had  "  emerged  from 
the  state  of  polemical  discussion,"  at  least  on  its  leading  doc- 
trines,  and  that  at  length  a  sound  construction  had  been  erected 
on  permanent  bases. 

This  expositor  was  John  Stuart  Mill  (1806-73).  He 
exercised,  without  doubt,  a  greater  influence  in  the  field  of 
English  economics  than  any  other  writer  since  Ricardo. 
His  systematic  treatise  has  been,  either  directly  or  through 

Literature  of  Political  Economy,  p.  57,  or  Senior's  Lectures  on  the  Tra*t~ 
mission  of  the  Previous  Metals,  &c.,  2d  ed. ,  p.  78. 


x 


SYSTEM  OF  NATURAL  LIBERTY.  147 

manuals  founded  on  it,  especially  that  of  Fawcett,  the  source 
from  which  most  of  our  contemporaries  in  these  countries 
have  derived  their  knowledge  of  the  science.  But  there  are 
other  and  deeper  reasons,  as  we  shall  see,  which  make  him,  in 
this  as  in  other  departments  of  knowledge,  a  specially  interest- 
ing and  significant  figure. 

In  1844  he  published  five  Essays  on  some  Unsettled  Ques- 
tions of  Political  Economy,  which  had  been  written  as  early 
as  1829  and  1830,  but  had,  with  the  exception  of  the  fifth, 
remained  in  manuscript.  In  these  essays  is  contained  any 
dogmatic  contribution  which  he  can  be  regarded  as  having 
made  to  the  science.  The  subject  of  the  first  is  the  laws 
of  interchange  between  nations.  He  shows  that,  when  two 
countries  trade  together  in  two  commodities,  the  prices  of  the 
commodities  exchanged  on  both  sides  (which,  as  Kicardo  had 
proved,  are  not  determined  by  cost  of  production)  will  adjust 
themselves,  through  the  play  of  reciprocal  demand,  in  such  a 
way  that  the  quantities  required  by  each  country  of  the  article 
which  it  imports  from  its  neighbour  shall  be  exactly  sufficient 
tc.  payfor  one  another.  This  is  the  law  which  appears,  with 
some  adcIeTTdevelopments,  in  his  systematic  treatise  under 
the  name  of  the  "equation  of  international  demand."  He 
then  discusses  the  division  of  the  gains.  The  most  important 
practical  conclusion  (not,  however,  by  any  means  an  undis- 
puted one)  at  which  he  arrives  in  this  essay  is,  that  the 
relaxation  of  duties  on  foreign  commodities,  not  operating  as 
protection  but  maintained  solely  for  revenue,  should  be  made 
contingent  on  the  adoption  of  some  corresponding  degree  of 
freedom  of  trade  with  England  by  thenation  from  which  the 
commodities  are  imported.  In  the  second  essay,  on  the  in- 
fluence of  consumption  on  production,  the  most  interesting 
results  arrived  at  are  the  propositions — (i)  that  absenteeism 
is  a  local,  not  a  national,  evil,  and  (2)  that,  whilst  there 
cannot  be  permanent  excess  of  production,  there  may  be  a 
temporary  excess,  not  only  of  any  one  article,  but  of  com- 
modities generally, — this  last,  however,  not  arising  from  over- 


148  POLITICAL  ECONOMY. 

production,  but  from  a  want  of  commercial  confidence.  Th« 
third  essay  relates  to  the  use  of  the  words  "  productive  "  and 
"  unproductive  "  as  applied  to  labour,  to  consumption,  and 
to  expenditure.  The  fourth  deals  with  profits  and  interest, 
especially  explaining  and  so  justifying  Kicardo's  theorem  that 
"  profits  depend  on  wages,  rising  as  wages  fall  and  falling  as 
wages  rise."  What  Eicardo  meant  was  that  profits  .lepend 
on  the  cost  of  wages  estimated  in  labour.  Hence  improve- 
ments in  the  production  of  articles  habitually  consumed  by 
the  labourer  may  increase  profits  without  diminishing  the  real 
remuneration  of  the  labourer.  The  last  essay  is  on  the  de- 
finition and  method  of  political  economy,  a  subject  later  and 
more  maturely  treated  in  the  author's  System  of  Logic. 

In  1 848  Mill  published  his  Principles  of  Political  Economy, 
with  some  of  their  Applications  to  Social  Philosophy.  This 
title,  though,  as  we  shall  see,  open  to  criticism,  indicated  on 
the  part  of  the  author  a  less  narrow  and  formal  conception  of 
the  field  of  the  science  than  had  been  common  amongst  his 
predecessors.  He  aimed,  in  fact,  at  producing  a  work  which 
might  replace  in  ordinary  use  the  Wealth  of  Nations,  which 
in  his  opinion  was  "  in  many  parts  obsolete  and  in  all  im- 
perfect." Adam  Smith  had  invariably  associated  the  general 
principles  of  the  subject  with  their  applications,  and  in  treat- 
ing those  applications  had  perpetually  appealed  to  other  and 
often  far  larger  considerations  than  pure  political  economy 
affords.  And  in  the  same  spirit  Mill  desired,  whilst  incor- 
porating all  the  results  arrived  at  in  the  special  science  by 
Smith's  successors,  to  exhibit  purely  economic  phenomena  in 
relation  to  the  most  advanced  conceptions  of  his  own  time 
on  the  general  philosophy  of  society,  as  Smith  had  done  in 
reference  to  the  philosophy  of  the  eighteenth  century.1 

1  Curiously,  in  an  otherwise  well-executed  Abridgment  of  Mill's  work, 
published  in  the  United  States  (1886)  by  J.  Laurence  Laughlin,  as  a 
text-book  for  colleges,  all  that  "  should  properly  be  classed  under  the 
head  of  Sociology  "  has  been  omitted,  Mill's  own  conception  being  thus  set 
wide,  and  his  book  made  to  conform  to  the  common  type. 


SYSTEM  OF  NATURAL  LIBERTY.  149 


This  design  he  certainly  failed  to  realise.  His  book  is 
fai  indeed  from  being  a  "  modern  Adam  Smith."  It  is  an 
admirably  lucid  and  even  elegant  exposition  of  the  Ricardian 
economics,  the  Malthusian  theory  being  of  course  incorporated 
with  these,  but,  notwithstanding  the  introduction  of  many 
minor  novelties,  it  is,  in  its  scientific  substance,  little  or 
nothing  more.  When  Cliffe  Leslie  says  that  Mill  so  qualified 
and  amended  the  doctrines  of  Ricardo  that  the  latter  could 
scarcely  have  recognised  them,  he  certainly  goes  a  great  deal 
too  far  :  Senior  really  did  more  in  that  direction.  Mill's 
effort  is  usually  to  vindicate  his  master  where  others  have 
censured  him,  and  to  palliate  his  admitted  laxities  of  expres- 
sion. Already  his  profound  esteem  for  Ricardo's  services  to 
economics  had  been  manifest  in  his  Essays,  where  he  says  of 
him,  with  some  injustice  to  Smith,  that,  "  having  a  science  to 
create,"  he  could  not  "  occupy  himself  with  more  than  the 
leading  principles,"  and  adds  that  "  no  one  who  has  thoroughly 
entered  into  his  discoveries  "  will  find  any  difficulty  in  work- 
ing out  "  even  the  minutiae  of  the  science."  James  Mill,  too, 
had  been  essentially  an  expounder  of  Ricardo  ;  and  the  son, 
whilst  greatly  superior  to  his  father  in  the  attractiveness  of 
his  expository  style,  is,  in  regard  to  his  economic  doctrine, 
substantially  at  the  same  point  of  view.  It  is  in  their  general 
philosophical  conceptions  and  their  views  of  social  aims  and 
ideals  that  the  elder  and  younger  Mill  occupy  quite  different 
positions  in  the  line  of  progress.  The  latter  could  not,  for 
example,  in  his  adult  period  have  put  forward  as  a  theory  of 
government  the  shallow  sophistries  which  the  plain  good  sense 
of  Macaulay  sufficed  to  expose  in  the  writings  of  the  former  ; 
and  he  had  a  nobleness  of  feeling  which,  in  relation  to  the 
higher  social  questions,  raised  him  far  above  the  ordinary 
coarse  utilitarianism  of  the  Benthamites. 

The  larger  and  more  philosophic  spirit  in  which  Mill  dealt 
with  social  subjects  was  undoubtedly  in  great  measure  due 
to  the  influence  of  Comte,  to  whom,  as  Mr.  Bain  justly  says, 
he  was  under  greater  obligations  than  he  himself  was  disposed 


150  POLITICAL  ECONOMY. 

to  admit.  Had  he  more  completely  undergone  that  influence, 
we  are  sometimes  tempted  to  think  he  might  have  wrought 
the  reform  in  economics  which  still  remains  to  he  achieved, 
emancipating  the  science  from  the  a  priori  system,  and 
founding  a  genuine  theory  of  industrial  life  on  observation 
in  the  broadest  sense.  But  probably  the  time  was  not  ripe 
for  such  a  construction,  and  it  is  possible  that  Mill's  native 
intellectual  defects  might  have  made  him  unfit  for  the  task, 
for,  as  Koscher  has  said,  "  ein  historischer  Kopf  war  er  nicht. ' 
However  this  might  have  been,  the  effects  of  his  early  train- 
ing, in  which  positive  were  largely  alloyed  with  metaphysical 
elements,  sufficed  in  fact  to  prevent  his  attaining  a  perfectly 
normal  mental  attitude.  He  never  altogether  overcame  the 
vicious  direction  which  he  had  received  from  the  teaching 
of  his  father,  and  the  influence  of  the  Benthamite  group  in 
which  he  was  brought  up.  Hence  it  was  that,  according  to 
the  striking  expression  of  Eoscher,  his  whole  view  of  life  was 
"  zu  wenig  aus  Einem  Gusse."  The  incongruous  mixture  of 
the  narrow  dogmas  of  his  youthful  period  with  the  larger 
ideas  of  a  later  stage  gave  a  wavering  and  indeterminate 
character  to  his  entire  philosophy.  He  is,  on  every  side, 
eminently  "  un-final ; "  he  represents  tendencies  to  new  forms 
of  opinion,  and  opens  new  vistas  in  various  directions,  but 
founds  scarcely  anything,  and  remains  indeed,  so  far  as  his 
own  position  is  concerned,  not  merely  incomplete  but  inco- 
herent.1 It  is,  however,  precisely  this  dubious  position  which 
seems  to  us  to  give  a  special  interest  to  his  career,  by  fitting 
him  in  a  peculiar  degree  to  prepare  and  facilitate  transitions. 

What  he  himself  thought  to  be  "  the  chief  merit  of  his 
treatise "  was  the  marked  distinction  drawn  between  the 
theory  of  production  and  that  of  distribution,  the  laws  of 

1  Mr.  John  Morley  ("  Mill  on  Religion,"  in  Critical  Miscellanies,  2d 
ser.,  1877)  betrays  something  like  consternation  at  finding  in  Mill's 
posthumous  writings  statements  of  opinion  distinctly  at  variance  with 
philosophic  doctrines  be  had  energetically  maintained  during  his  whole 
life. 


SYSTEM  OF  NATURAL  LIBERTY.  151 

the  former  being  based  on  unalterable  natural  facts,  whilst 
the  course  of  distribution  is  modified  from  time  to  time 
by  the  changing  ordinances  of  society.  This  distinction,  we 
may  remark,  must  not  be  too  absolutely  stated,  for  the 
organisation  of  production  changes  with  social  growth,  and, 
as  Lauderdale  long  ago  showed,  the  nature  of  the  distribution 
in  a  community  reacts  on  production.  But  there  is  a  sub- 
stantial truth  in  the  distinction,  and  the  recognition  of  it  tends 
to  concentrate  attention  on  the  question — How  can,  we  im- 
prove  the  existing  distribution  of  wealth  ?  The  study  of  this 
problem  led  Mill,  as  he  advanced  in  years,  further  and  further 
in  the  direction  of  socialism ;  and,  whilst  to  the  end  of  his 
life  his  book,  however  otherwise  altered,  continued  to  deduce 
the  Eicardian  doctrines  from  the  principle  of  enlightened 
selfishness,  he  was  looking  forward  to  an  order  of  things  in 
which  synergy  should  be  founded  on  sympathy. 

The  gradual  modification  of.  his  views  in  relation  to  the 
economic  constitution  of  society  is  set  forth  in  his  Auto- 
biography. In  his  earlier  days,  he  tells  us,  he  "had  seen 
little  further  than  the  old  school "  (note  this  significant 
title)  "of  political  economy  into  the  possibilities  of  funda- 
mental improvement  in  social  arrangements.  Private  pro- 
perty, as  now  understood,  and  inheritance  appeared  the 
dernier  mot  of  legislation."  The  notion  of  proceeding  to  any 
radical  redress  of  the  injustice  "involved  in  the  fact  that 
some  are  born  to  riches  and  the  vast  majority  to  poverty  " 
he  had  then  reckoned  chimerical  But  now  his  views  were 
such  as  would  "  class  him  decidedly  under  the  general  designa- 
tion of  socialist ; "  he  had  been  led  to  believe  that  the  whole 
contemporary  framework  of  economic  life  was  merely  tem- 
porary and  provisional,  and  that  a  time  would  come  when 
"  the  division  of  the  produce  of  labour,  instead  of  depending, 
as  in  so  great  a  degree  it  now  does,  on  the  accident  of  birth, 
would  be  made  by  concert  on  an  acknowledged  principle  of 
justice."  "The  social  problem  of  the  future"  he  considered 
to  be  "  how  to  unite  the  greatest  individual  liberty  of  action," 


152  POLITICAL  ECONOMY. 

\vhich  was  often  compromised  in  socialistic  schemes,  "with 
a  common  ownership  in  the  raw  material  of  the  globe,  and 
an  equal  participation  in  all  the  benefits  of  combined  labour." 
These  ideas,  he  says,  were  scarcely  indicated  in  the  first  edition 
of  the  Political  Economy,  rather  more  clearly  and  fully  in  the 
second,  and  quite  unequivocally  in  the  third, — the  French 
Revolution  of  1848  having  made  the  public  more  open  to  the 
reception  of  novelties  in  opinion. 

Whilst  thus  looking  forward  to  a  new  economic  order, 
he  yet  thinks  its  advent  very  remote,  arid  believes  that  the 
inducements  of  private  interest  will  in  the  meantime  be  in- 
dispensable.1 On  the  spiritual  side  he  maintains  a  similar 
attitude  of  expectancy.  He  anticipates  the  ultimate  disap- 
pearance of  theism,  and  the  substitution  of  a  purely  human 
religion,  but  believes  that  the  existing  doctrine  will  long  be 
necessary  as  a  stimulus  and  a  control.  He  thus  saps  existing 
foundations  without  providing  anything  to  take  their  place, 
and  maintains  the  necessity  of  conserving  for  indefinite  periods 
what  he  has  radically  discredited.  Nay,  even  whilst  sowing 
the  seeds  of  change  in  the  direction  of  a  socialistic  organisation 
of  society,  he  favours  present  or  proximate  arrangements  which 
would  urge  the  industrial  world  towards  other  issues.  The 
system  of  peasant  proprietorship  of  land  is  distinctly  indi- 
vidualistic in  its  whole  tendency  ;  yet  he  extravagantly  praises 
it  in  the  earlier  part  of  his  book,  only  receding  from  that 
laudation  when  he  comes  to  the  chapter  on  the  future  of  the 
labouring  classes.  And  the  system  of  so-called  co-operation  in 
production  which  he  so  warmly  commended  in  the  later  edi- 
tions of  his  work,  and  led  some  of  his  followers  to  preach  as 
the  one  thing  needful,  would  inevitably  strengthen  the  principle 
of  personal  property,  and,  whilst  professing  at  most  to  sub- 
stitute the  competition  of  associations  for  that  of  individuals, 
would  by  no  means  exclude  the  latter. 

The  elevation  of   the  working  classes   he   bound  up  too 

1  8e«  also  his  Chapters  on  Socialism,  in  Fortnightly  Review,  1879. 


SYSTEM  OF  NATURAL  LIBERTY.  153 

exclusively  with  the  Malthusian  ethics,  on  which  lie  laid  quite 
an  extravagant  stress,  though,  as  Mr.  Bain  has  observed,  it  is 
not  easy  to  make  out  his  exact  views,  any  more  than  his 
father's,  on  this  subject.  We  have  no  reason  to  think  that  he 
ever  changed  his  opinion  as  to  the  necessity  of  a  restriction  on  ' 
population ;  yet  that  element  seems  foreign  to  the  socialistic 
idea  to  which  he  increasingly  leaned.  It  is  at  least  difficult 
to  see  how,  apart  from  individual  responsibility  for  the  sup- 
port of  a  family,  what  Malthus  called  moral  restraint  could 
be  adequately  enforced.  This  difficulty  is  indeed  the  fatal 
flaw  which,  in  Malthus's  own  opinion,  vitiated  the  scheme  of 
Godwin. 

Mill's  openness  to  new  ideas  and  his  enthusiasm  for  im- 
provement cannot  be  too  much  admired.  But  there  appears 
to  have  been  combined  with  these  fine  traits  in  his  mental 
constitution  a  certain  want  of  practical  sense,  a  failure  to 
recognise  and  acquiesce  in  the  necessary  conditions  of  human 
life,  and  a  craving  for  "better  bread  than  can  be  made  of 
wheat."  He  entertained  strangely  exaggerated,  or  rather  per- 
verted, notions  of  the  "subjection,"  the  capacities,  and  the 
rights  of  women.  He  encourages  a  spirit  of  revolt  on  the  part 
of  working  men  against  their  perpetual  condemnation,  as  a 
class,  to  the  lot  of  living  by  wages,  without  giving  satisfactory 
proof  that  this  state  of  things  is  capable  of  change,  and  with- 
out showing  that  such  a  lot,  duly  regulated  by  law  and 
morality,  is  inconsistent  with  their  real  happiness.  He  also 
insists  on  the  "  independence  "  of  the  working  class — which, 
according  to  him,  fard,  da  se — in  such  a  way  as  to  obscure,  if 
not  to  controvert,  the  truths  that  superior  rank  and  wealth  are 
naturally  invested  with  social  power,  and  are  bound  in  duty 
to  exercise  it  for  the  benefit  of  the  community  at  large,  and 
especially  of  its  less  favoured  members.  And  he  attaches  a 
quite  undue  importance  to  mechanical  and,  indeed,  illusory 
expedients,  such  as  the  limitation  of  the  power  of  bequest  and 
the  confiscation  of  the  "  unearned  increment "  of  rent. 

With  respeci  to  economic  method  also,  he  shifted  his  poo- 


154  POLITICAL  ECONOMY. 

tion ;  yet  to  the  end  occupied  uncertain  ground.  In  the  fifth 
of  his  early  essays  he  asserted  that  the  method  a  priori  is  the 
only  mode  of  investigation  in  the  social  sciences,  and  that  the 
method  a  posteriori  "  is  altogether  inefficacious  in  those  sciences, 
as  a  means  of  arriving  at  any  considerable  body  of  valuable 
truth,"  When  he  wrote  his  Logic,  he  had  learned  from 
Comte  that  the  a  posteriori  method — in  the  form  which  he 
chose  to  call  "inverse  deduction" — was  the  only  mode  of 
arriving  at  truth  in  general  sociology ;  and  his  admission  of 
this  at  once  renders  the  essay  obsolete.  But,  unwilling  to 
relinquish  the  a  priori  method  of  his  youth,  he  tries  to  estab- 
lish a  distinction  of  two  sorts  of  economic  inquiry,  one  of 
which,  though  not  the  other,  can  be  handled  by  that  method. 
Sometimes  he  speaks  of  political  economy  as  a  department 
"  carved  out  of  the  general  body  of  the  science  of  society ; " 
whilst  on  the  other  hand  the  title  of  his  systematic  work  im- 
plies a  doubt  whether  political  economy  is  a  part  of  "  social 
philosophy''  at  all,  and  not  rather  a  study  preparatory  and 
auxiliary  to  it.  Thus,  on  the  Idgical  as  well  as  the  dogmatic 
side,  he  halts  between  two  opinions.  Notwithstanding  his 
misgivings  and  even  disclaimers,  he  yet  remained,  as  to  method, 
a  member  of  the  old  school,  and  never  passed  into  the  new  or 
"  historical "  school,  to  which  the  future  belongs. 

The  question  of  economic  method  was  also  taken  up  by  the 
ablest  of  his  disciples,  John  Elliott  Cairnes  (1824-75)  who 
devoted  a  volume  to  the  subject  (Logical  Method  of  Political 
Economy,  1857  ;  ad  ed.,  1875).  Professor  Walker  has  spoken 
of  the  method  advocated  by  Cairnes  as  being  different  from 
that  put  forward  by  Mill,  and  has  even  represented  the  former 
as  similar  to,  if  not  identical  with,  that  of  the  German  his- 
torical school.  But  this  is  certainly  an  error.  Cairnes,  not- 
withstanding some  apparent  vacillation  of  view  and  certain 
concessions  more  formal  than  real,  maintains  the  utmost  rigour 
of  the  deductive  method  ;  he  distinctly  affirms  that  in  political 
economy  there  is  no  room  for  induction  at  all,  "  the  economist 
starting  with  a  knowledge  of  ultimate  causes,"  and  being  thus, 


SYSTEM  OF  NATURAL  LIBERTY.  155 

"at  the  outset  of  his  enterprise,  at  the  position  which  the 
physicist  only  attains  after  ages  of  laborious  research."  He 
does  not,  indeed,  seem  to  be  advanced  beyond  the  point  of 
view  of  Senior,  who  professed  to  deduce  all  economic  truth 
from  four  elementary  propositions.  Whilst  Mill  in  his  Logic 
represents  verification  as  an  essential  part  of  the  process  of 
demonstration  of  economic  laws,  Cairnes  holds  that,  as  they 
"  are  not  assertions  respecting  the  character  or  sequence  of 
phenomena  "  (though  what  else  can  a  scientific  law  be  ?),  "  they 
can  neither  be  established  nor  refuted  by  statistical  or  docu- 
mentary evidence."  A  proposition  which  affirms  nothing  re- 
specting phenomena  cannot  be  controlled  by  being  confronted 
with  phenomena.  Notwithstanding  the  unquestionable  ability 
of  his  book,  it  appears  to  mark,  in  some  respects,  a  retro- 
gression in  methodology,  and  can  for  the  future  possess  only 
an  historical  interest. 

Kegarded  in  that  light,  the  labours  of  Mill  and  Cairnes  on 
the  method  of  the  science,  though  intrinsically  unsound,  had 
an  important  negative  effect.  They  let  down  the  old  political 
economy  from  its  traditional  position,  and  reduced  its  extra- 
vagant pretensions  by  two  modifications  of  commonly  accepted 
views.  First,  whilst  Eicardo  had  never  doubted  that  in  all 
his  reasonings  he  was  dealing  with  human  beings  as  they  ' 
actually  exist,  they  showed  that  the  science  must  be  regarded 
as  a  purely  hypothetic  one.  Its  deductions  are  based  on 
unreal,  or  at  least  one-sided,  assumptions,  the  most  essential  of 
•which  is  that  of  the  existence  of  the  so-called  "  economicjtnan," 
a  being  who  is  influenced  by  two  motives  only,  that  of  ac- 
quiring wealth  and  that  of  avoiding  exertion ;  and  only  so  far 
as  the  premises  framed  on  this  conception  correspond  with  fact 
ean  the  conclusions  be  depended  on  in  practice.  Senior  in 
vain  protested  against  such  a  view  of  the  science,  which,  as  he 
saw,  compromised  its  social  efficacy  ;  whilst  Torrens,  who  had 
previously  combated  the  doctrines  of  Ricardo,  hailed  Mill's 
new  presentation  of  political  economy  as  enabling  him,  whilst 
in  one  sense  rejecting  those  doctrines,  in  another  sense  to 


156  POLITICAL  ECONOMY. 

accept  them.  Secondly,  beside  economic  science,  it  had  often 
been  said,  stands  an  economic  art, — the  former  ascertaining 
truths  respecting  the  laws  of  economic  phenomena,  the  latter 
prescribing  the  right  kind  of  economic  action  ;  and  many  had 
assumed  that,  the  former  being  given,  the  latter  is  also  in  our 
possession — that,  in  fact,  we  have  only  to  convert  theorems 
into  precepts,  and  the  work  is  done.  But  Mill  and  Cairnes 
made  it  plain  that  this  statement  could  not  be  accepted,  that 
action  can  no  more  in  the  economic  world  than  in  any  other 
province  of  life  be  regulated  by  considerations  borrowed  from 
one  department  of  things  only ;  that  economics  can  suggest 
ideas  which  are  to  be  kept  in  view,  but  that,  standing  alone, 
it  cannot  direct  conduct — an  office  for  which  a  wider  prospect 
of  human  affairs  is  required.  This  matter  is  best  elucidated 
by  a  reference  to  Comte's  classification,  or  rather  hierarchical 
arrangement,  of  the  sciences.  Beginning  with  the  least  com- 
plex, mathematics,  we  rise  successively  to  astronomy,  physics, 
chemistry,  thence  to  biology,  and  from  it  again  to  sociology. 
In  the  course  of  this  ascent  we  come  upon  all  the  great 
laws  which  regulate  the  phenomena  of  the  inorganic  world, 
of  organised  beings,  and  of  society.  A  further  step,  however, 
remains  to  be  taken — namely,  to  morals ;  and  at  this  point 
the  provinces  of  theory  and  practice  tend  to  coincide,  because 
every  element  of  conduct  has  to  be  considered  in  relation 
to  the  general  good.  In  the  final  synthesis  all  the  previous 
analyses  have  to  be  used  as  instrumental,  in  order  to  determine 
how  every  real  quality  of  things  or  men  may  be  made  to 
converge  to  the  welfare  of  Humanity. 

Cairnes's  most  important  economic  publication  was  his  last, 
entitled  Some  Leading  Principles  of  Political  Economy  newly 
Expounded,  1874.  In  this  work,  which  does  not  profess  to 
be  a  complete  treatise  on  the  science,  he  criticises  and  emends 
the  statements  which  preceding  writers  had  given  of  some  of 
its  principal  doctrines,  and  treats  elaborately  of  the  limitations 
with  which  they  are  to  be  understood,  and  the  exceptions  to 
them  which  may  be  produced  by  special  circumstances.  Whilst 


SYSTEM  OF  NATURAL  LIBERTY.  157 

marked  by  great  ability,  it  affords  evidence  of  what  has  been 
justly  observed  as  a  weakness  in  Cairnes's  mental  constitution 
— his  "  deficiency  in  intellectual  sympathy,"  and  consequent 
frequent  inability  to  see  more  than  one  side  of  a  truth. 

The  three  divisions  of  the  book  relate  respectively  to  (i) 
value,  (2)  labour  and  capital,  and  (3)  international  trade.  In 
the  first  he  begins  by  elucidating  the  meaning  of  the  word 
"  value/'  and  under  this  head  controverts  the  view  of  Jevons 
that  the  exchange  value  of  anything  depends  entirely  on  its 
utility,  without,  perhaps,  distinctly  apprehending  what  Jevons 
meant  by  this  proposition.  On  supply  and  demand  he  shows, 
as  Say  had  done  before,  that  these,  regarded  as  aggregates,  are 
not  independent,  but  strictly  connected  and  mutually  depen- 
dent phenomena — identical,  indeed,  under  a  system  of  barter, 
but,  under  a  money  system,  conceivable  as  distinct.  Supply 
and  demand  with  respect  to  particular  commodities  must  be 
understood  to  mean  supply  and  demand  at  a  given  price ;  and 
thus  we  are  introduced  to  the  ideas  of  market  price  and  normal 
price  (as,  following  Cherbuliez,  he  terms  what  Smith  less 
happily  called  natural  price).  Normal  price  again  leads  to  the 
consideration  of  cost  of  production,  and  here,  against  Mill  and 
others,  he  denies  that  profit  and  wages  enter  into  cost  of  pro- 
duction ;  in  other  words,  he  asserts  what  Senior  (whom  he 
does  not  name)  had  said  before  him,  though  he  had  not  con- 
sistently carried  out  the  nomenclature,  that  cost  of  production 
is  the  sum  of  labour  and  abstinence  necessary  to  production, 
wages  and  profits  being  the  remuneration  of  sacrifice  and 
not  elements  of  it.  But,  it  may  well  be  asked,  How  can  an 
amount  of  labour  be  added  to  an  amount  of  abstinence  ?  Must 
not  wages  and  profits  be  taken  as  "  measures  of  cost  "  ?  By 
adhering  to  the  conception  of  "  sacrifice,"  he  exposes  the 
emptiness  of  the  assertion  that  "  dear  labour  is  the  great 
obstacle  to  the  extension  of  British  trade " — a  sentence  in 
which  "  British  trade "  means  capitalists'  profits.  At  this 
point  we  are  introduced  to  a  doctrine  now  first  elaborated, 
though  there  are  indications  of  it  in  Mill,  of  whose  theory  of 


158  POLITICAL  ECONOMY. 

international  values  it  is* in  fact  an  extension.  In  foreign 
trade  cost  of  production,  in  Cairnes's  sense,  does  not  regu« 
late  values,  because  it  cannot  perform  that  function  except 
under  a  re'gime  of  effective  competition,  and  between  different 
countries  effective  competition  does  not  exist.  But,  Cairnes  asks, 
to  what  extent  does  it  exist  in  domestic  industries?  So  far 
as  capital  is  concerned,  he  thinks  the  condition  is  sufficiently 
fulfilled  over  the  whole  field — a  position,  let  it  be  said  in 
passing,  which  he  does  not  seem  to  make  out,  if  we  consider 
the  practical  immobility  of  most  invested,  as  distinct  from 
disposable,  capital.  But  in  the  case  of  labour  the  requisite 
competition  takes  place  only  within  certain  social,  or  rather 
industrial,  strata.  The  world  of  industry  may  be  divided  into 
a  series  of  superposed  groups,  and  these  groups  arc  practically 
"  non-competing,"  the  disposable  labour  in  an}'  one  of  them 
being  rarely  capable  of  choosing  its  field  in  a  higher.1  The 
law  that  cost  of  production  determines  price  cannot,  therefore, 
be  absolutely  stated  respecting  domestic  any  more  than  respect- 
ing international  exchange ;  as  it  fails  for  the  latter  univer- 
sally, so  it  fails  for  the  former  as  between  non-competing 
groups.  The  law  that  holds  between  these  is  similar  to  that 
governing  international  values,  which  may  be  called  the  equa- 
tion of  reciprocal  demand.  Such  a  state  of  relative  prices  will 
establish  itself  amongst  the  products  of  these  groups  as  shall 
enable  that  portion  of  the  products  of  each  group  which  is 
applied  to  the  purchase  of  the  products  of  all  other  groups 
to  discharge  its  liabilities  towards  those  other  groups.  The 
reciprocal  demand  of  the  groups  determines  the  "  average 
relative  level"  of  prices  within  each  group;  whilst  cost  of 

1  Economists  are  fond  of  comparing  the  rate  of  profit  or  wages  in  cne 
nation  (using  this  word  in  its  economic  sense)  to  a  single  fluid  surface 
which  is  continually  disturbed  by  transient  influences  and  continually 
tending  to  recover  its  level.  We  must  compare  these  rates  in  different 
nations  to  reservoirs  which,  not  communicating  with  each  other,  stand 
always  at  different,  though  variable,  levels.  And  the  latter  comparison 
will  apply  also  to  the  rates  (at  least  of  wages)  in  different  economic 
"groups,"  or  strata,  within  the  same  community. 


SYSTEM  OF  NATURAL  LIBERTY.  159 

production  regulates  the  distribution  of  price  among  the 
individual  products  of  each  group.  This  theorem  is  perhaps 
of  no  great  practical  value ;  but  the  tendency  of  the  whole 
investigation  is  to  attenuate  the  importance  of  cost  of  pro- 
duction as  a  regulator  of  normal  price,  and  so  to  show  that 
ye4-  ^aother  of  the  accepted  doctrines  of  the  science  had  been 
propounded  in  too  rigid  and  absolute  a  form.  As  to  market 
price,  the  formula  by  which  Mill  had  defined  it  as  the  price 
which  equalises  demand  and  supply  Cairnes  shows  to  be  an 
identical  proposition,  and  he  defines  it  as  the  price  which 
most  advantageously  adjusts  the  existing  supply  to  the  exist- 
ing demand  pending  the  coming  forward  of  fresh  supplies  from 
the  sources  of  production. 

His  second  part  is  chiefly  remarkable  for  his  defence  of 
what  is  known  as  the  wages  fund  doctrine,  to  which  we 
adverted  when  speaking  of  Senior.  Mill  had  given  up  this 
doctrine,  having  been  convinced  by  Thornton  that  it  was 
erroneous ;  but  Cairnes  refused  to  follow  his  leader,  who,  as 
he  believes,  ought  not  to  have  been  convinced.1  After  having 
given  what  is  certainly  a  fallacious  reply  to  Longe's  criticism 
of  the  expression  "average  rate  of  wages,"  he  proceeds  to 
vindicate  the  doctrine  in  question  by  the  consideration  that, 
the  amount  of  a  nation's  wealth  devoted  at  any  time  to  the 
payment  of  wages — if  the  character  of  the  national  industries 
and  the  methods  of  production  employed  remain  the  same — 
is  in  a  definite  relation  to  the  amount  of  its  general  capital ; 
the  latter  being  given,  the  former  is  also  given.  In  illus- 
{fating  his  view  of  the  subject,  he  insists  on  the  principle 
(true  in  the  main,  but  too  absolutely  formulated  by  Mill)  that 
*'  demand  for  commodities  is  not  demand  for  labour."  It  is 
not  necessary  here  to  follow  his  investigation,  for  his  reason- 
ing has  not  satisfied  his  successors,  with  the  exception  of 

1  Jevons  strangely  says,  in  the  Preface  to  his  Theory  of  Political 
Economy,  2d  ed.,  that  the  wage  fund  doctrine  "has  been  abandoned 
by  most  English  economists  owing  to  the  attacks,"  amongst  others,  "of 
Cairnes."  Cairnes  was,  in  truth,  a  supporter  of  iho  doctrine. 


I6o  POLITICAL  ECONOMY. 

Fawcett,  and  the  question  of  wages  is  now  commonly  treated 
without  reference  to  a  supposed  determinate  wages  fund. 
Cairnes  next  studies  trades-unionism  in  relation  to  wages,  and 
arrives  in  substance  at  the  conclusion  that  the  only  way  in 
which  it  can  affect  their  rate  is  by  accelerating  an  advance  which 
must  ultimately  have  taken  place  independently  of  its  action. 
He  also  takes  occasion  to  refute  Mr.  (now  Lord)  Brassey'a 
supposed  law  of  a  uniform  cost  of  labour  in  every  part  of 
the  world.  Turning  to  consider  the  material  prospects  of  the 
working  classes,  he  examines  the  question  of  the  changes 
which  may  be  expected  in  the  amount  and-  partition  of  the 
fund  out  of  which  abstinence  and  labour  are  remunerated. 
He  here  enunciates  the  principle  (which  had  been,  however, 
stated  before  him  by  Bicardo  and  Senior)  that  the  increased 
productiveness  of  industry  will  not  affect  either  profit  or  wages 
unless  it  cheapen  the  commodities  which  the  labourer  con- 
sumes. These  latter  being  mostly  commodities  of  which  raw 
produce  is  the  only  or  principal  element,  their  cost  of  produc- 
tion, notwithstanding  improvements  in  knowledge  and  art, 
will  increase  unless  the  numbers  of  the  labouring  class  be 
steadily  kept  in  check  ;  and  hence  the  possibility  of  elevating 
the  condition  of  the  labourer  is  confined  within  very  narrow 
limits,  if  he  continues  to  be  a  labourer  only.  The  condition 
of  any  substantial  and  permanent  improvement  in  his  lot  is 
that  he  should  cease  to  be  a  mere  labourer — that  profits  should 
be  brought  to  reinforce  the  wages  fund,  which  has  a  tendency, 
in  the  course  of  industrial  progress,  to  decline  relatively  to  the 
general  capital  of  a  country.  And  hence  Cairnes — abandon- 
ing the  purely  theoretic  attitude  which  he  elsewhere  represents 
as  the  only  proper  one  for  the  economist — recommends  the 
system  of  so-called  co-operation  (that  is,  in  fact,  the  abolition  of 
the  large  capitalist)  as  offering  to  the  working  classes  "the  sole 
means  of  escape  from  a  harsh  and  hopeless  destiny,"  and  puta 
aside  rather  contemptuously  the  opposition  of  the  Positivists 
to  this  solution,  which  yet  many  besides  the  Positivists,  as, 
for  example,  Leslie  and  F.  A.  "Walker,  regard  as  chimerical. 


SYSTEM  OF  NATURAL  LIBERTY.  161 

The  third  part  is  devoted  mainly  to  an  exposition  of  Ricardo's 
doctrine  of  the  conditions  of  international  trade  and  Mill's 
theory  of  international  values.  The  former  Cairnes  modifies 
by  introducing  his  idea  of  the  partial  influence  of  reciprocal 
demand,  as  distinguished  from  cost  of  production,  on  the  regu- 
lation of  domestic  prices,  and  founds  on  this  rectification  an 
interesting  account  of  the  connection  between  the  wages  pre- 
vailing in  a  country  and  the  character  and  course  of  its  ex- 
ternal trade.  He  emends  Mill's  statement,  which  represented 
the  produce  of  a  country  as  exchanging  for  that  of  other  coun- 
tries at  such  values  "  as  are  required  in  order  that  the  whole 
of  her  exports  may  exactly  pay  for  the  whole  of  her  imports  " 
by  substituting  for  the  latter  phrase  the  condition  that  each 
country  should  by  means  of  her  exports  discharge  all  her 
foreign  liabilities — in  other  words,  by  introducing  the  consi- 
deration of  the  balance  of  debts.  This  idea  was  not  new ; 
it  had  been  indicated  by  John  Leslie  Foster  as  early  as  1804,* 
and  was  touched  on  by  Mill  himself ;  but  Cairnes  expounds  it 
well ;  and  it  is  important  as  clearing  away  common  misconcep- 
tions, and  sometimes  removing  groundless  alarms.2  Passing 
to  the  question  of  free  trade,  he  disposes  of  some  often-repeated 
protectionist  arguments,  and  in  particular  refutes  the  American 
allegation  of  the  inability  of  the  highly-paid  labour  of  that 
country  to  compete  with  the  "pauper  labour"  of  Europe. 
He  is  not  so  successful  in  meeting  the  "political  argument," 
founded  on  the  admitted  importance  for  civilisation  of  develop- 
ing diversified  national  industries ;  and  he  meets  only  by  one 
of  the  highly  questionable  commonplaces  of  the  doctrinaire 
economists  Mill's  proposition  that  protection  may  foster  nascent 
industries  really  adapted  to  a  country  till  they  have  struck 
foot  and  are  able  to  endure  the  stress  of  foreign  competition. 

We  have  dwelt  at  some  length  on  this  work  of  Cairnes, 
aot  only  because  it  presents  the  latest  forms  of  several  accepted 

1  In  his  Essay  on  the  Principle  of  Commercial  Exchanges. 
1  On  this  whole  subject  see  Professor  C.  F.  Bastable'a  Theory  of  Inter- 
national Trade,  1887. 

L 


162  POLITICAL  ECONOMY. 

economic  doctrines,  but  also  because  it  is,  and,  we  believe, 
will  remain,  the  last  important  product  of  the  old  English 
school.  The  author  at  the  outset  expresses  the  hope  that  it 
will  strengthen,  and  add  consistence  to,  the  scientific  fabric 
"  built  up  by  the  labours  of  Adam  Smith,  Malthus,  Ricardo, 
and  Mill."  Whilst  recognising  with  him  the  great  merits 
of  Smith,  and  the  real  abilities  and  services  of  his  three 
successors  here  named,  we  cannot  entertain  the  same  opinion 
as  Cairnes  respecting  the  permanence  of  the  fabric  they  con- 
structed. We  hold  that  a  new  edifice  is  required,  incorporating 
indeed  many  of  the  materials  of  the  old,  but  planned  on  dif- 
ferent ideas  and  in  some  respects  with  a  view  to  different  ends 
— above  all,  resting  on  different  philosophic  foundations,  and 
having  relation  in  its  whole  design  to  the  more  comprehensive 
structure  of  which  it  will  form  but  one  department,  namely, 
the  general  science  of  society. 

We  shall  hereafter  have  occasion  to  refer  to  Cairnes's  Essays 
in  Political  Economy,  1873.  His  Slave  Power  (1862)  was  the 
most  valuable  work  which  appeared  on  the  subject  of  the 
great  American  conflict 


FRANCE. 

All  the  later  European  schools  presuppose — in  part  adopting, 
in  part  criticising — the  work  of  the  English  economists  from 
Smith a  to  Ricardo  and  the  Epigoni.  The  German  school  has 
had  in  a  greater  degree  than  any  other  a  movement  of  its  own 

1  The  first  French  translation  of  the  Wealth  of  Nations,  by  Blavet, 
appeared  in  the  Journal  de  V Agriculture,  du  Commerce,  des  Finances,  et 
des  Arts,  1779—80  ;  new  editions  of  it  were  published  in  1781,  1788,  and 
1800  ;  it  was  also  printed  at  Amsterdam  in  1784.  Smith  himself  recom- 
mended it  in  his  third  edition  of  the  original  as  excellent.  In  1790 
appeared  the  translation  by  Roucher,  to  which  Condorcet  had  intended 
to  add  notes,  and  in  1802  that  by  Count  Germain  Gamier,  executed 
during  his  exile  in  England,  which  is  now  considered  the  standard  ver- 
siou,  and  has  been  reproduced,  with  notes  by  Say,  Sismondi,  Blanqui, 
&c.(  in  the  Collection  des  Principaux  jZconomistet. 


SYSTEM  OF  NATURAL  LIBERTY.  163 

—following,  at  least  in  its  more  recent  period,  an  original 
method,  and  tending  to  special  and  characteristic  conclusions. 
The  French  school,  on  the  other  hand, — if  we  omit  the 
socialists,  who  do  not  here  come  under  consideration, — has 
in  the  main  reproduced  the  doctrines  of  the  leading  English 
thinkers, — stopping  short,  however,  in  general  of  the  extremes 
of  Ricardo  and  his  disciples.  In  the  field  of  exposition  the 
French  are  unrivalled  ;  and  in  political  economy  they  have 
produced  a  series  of  more  or  less  remarkable  systematic  trea- 
tises, text  books,  and  compendiums,  at  the  head  of  which 
stands  the  celebrated  work  of  J.  B.  Say.  But  the  number 
of  seminal  minds  which  have  appeared  in  French  economic 
literature — of  writers  who  have  contributed  important  truths, 
introduced  improvements  of  method,  or  presented  the  phe- 
nomena under  new  lights — has  not  been  large.  Sismondi, 
Dunoyer,  and  Bastiat  will  deserve  our  attention,  as  being  the 
most  important  of  those  who  occupy  independent  positions 
(whether  permanently  tenable  or  not),  if  we  pass  over  for  the 
present  the  great  philosophical  renovation  of  Auguste  Comte, 
which  comprehended  actually  or  potentially  all  the  branches 
of  sociological  inquiry.  Before  estimating  the  labours  of 
Bastiat,-  we  shall  find  it  desirable  to  examine  the  views  of 
Carey,  the  most  renowned  of  American  economists,  with  which 
the  latest  teachings  of  the  ingenious  and  eloquent  Frenchman 
are,  up  to  a  certain  point,  in  remarkable  agreement.  Cournot, 
too,  must  find  a  place  among  the  French  writers  of  this  period, 
as  the  chief  representative  of  the  conception  of  a  mathematical 
method  in  political  economy. 

Of  Jean  Baptiste  Say  (1767-1832)  Eicardo  says — "He  was 
the  first,  or  among  the  first,  of  Continental  writers  who  justly 
appreciated  and  applied  the  principles  of  Smith,  and  has 
done  more  than  all  other  Continental  writers  taken  together 
to  recommend  that  enlightened  and  beneficial  system  to  the 
nations  of  Europe."  The  Wealth  of  Nations  in  the  original 
language  was  placed  in  Say's  hands  by  Claviere,  afterwards 
minister,  then  director  of  the  assurance  society  of  which 


164  POLITICAL  ECONOMY. 

Say  was  a  clerk  ;  and  the  book  made  a  powerful  impression 
on  him.  Long  afterwards,  when  Dupont  de  Nemours  com- 
plained of  his  injustice  to  the  physiocrats,  and  claimed  him  as, 
through  Smith,  a  spiritual  grandson  of  Quesnay  and  nephew 
of  Turgot,  he  replied  that  he  had  learned  to  read  in  the 
writings  of  the  mercantile  school,  had  learned  to  think  in  those 
of  Quesnay  and  his  followers,  but  that  it  was  in  Smith  that 
he  had  learned  to  seek  the  causes  and  the  effects  of  social 
phenomena  in  the  nature  of  things,  and  to  arrive  at  this  last 
by  a  scrupulous  analysis.  His  Traite  d'tfconomie  Pulitique 
(1803)  was  essentially  founded  on  Smith's  work,  but  he  aimed 
at  arranging  the  materials  in  a  more  logical  and  instructive 
order.1  He  has  the  French  art  of  easy  and  lucid  exposition, 
though  his  facility  sometimes  degenerates  into  superficiality  j 
and  hence  his  book  became  popular,  both  directly  and  through 
translations  obtained  a  wide  circulation,  and  diffused  rapidly 
through  the  civilised  world  the  doctrines  of  the  master.  Say's 
knowledge  of  common  life,  says  Roscher,  was  equal  to  Smith's; 
but  he  falls  far  below  him  in  living  insight  into  larger  political 
phenomena,  and  he  carefully  eschews  historical  and  philoso- 
phical explanations.  He  is  sometimes  strangely  shallow,  aa 
when  he  says  that  "  the  best  tax  is  that  smallest  in  amount.'1 
He  appears  not  to  have  much  claim  to  the  position  of  an 
original  thinker  in  political  economy.  Kicardo,  indeed,  speaks 
of  him  as  having  "  enriched  the  science,  by  several  discussions, 
original,  accurate,  and  profound."  "What  he  had  specially  in 
view  in  using  these  words  was  what  is,  perhaps  rather  pre- 
tentiously, called  Say's  theorie  des  debouches,  with  his  con- 
nected disproof  of  the  possibility  of  a  universal  glut.  The_ 
theory  amounts  simply  to  this,  that  buying  is  also  selling,  and 
that  it  is  by  producing  that  we  are  enabled  to  purchase  the 
products  of  others.  Several  distinguished  economists,  especially 

1  He  grossly  exaggerated  Smith's  faults  of  metho^  Thus  he  says— 
"L'ouvrage  de  Smith  n'est  qu'un  assemblage  confus.des  principes  le« 
plus  sains  de  1' Economic  politique  .  .  .  sou  livre  eat  un  vaste  chaoi 
d'id»5es  justee  "  (Ditcevri  Preliminaire). 


SYSTEM  OF  NATURAL  LIBERTY.  165 

Malthus  and  Sismondi,  in  consequence  cliiefly  of  a  misiuter-^ 
pretation  of  the  phenomena  of  commercial  crises,  maintained  / 
that  there  might  be  general  over-supply  or  excess  of  all 
commodities  above  the  demand.  This  Say  rightly  denied. 
A  particular  branch  of  production  may,  it  must  indeed  be 
admitted,  exceed  the  existing  capabilities  of  the  market ;  but, 
if  we  remember  that  supply  is  demand,  that  commodities  are 
purchasing  power,  we  cannot  accept  the  doctrine  of  the  possi- 
bility of  a  universal  glut  without  holding  that  we  can  have 
too  much  of  everything — that  "  all  men  can  be  so  fully 
provided  with  the  precise  articles  they  desire  as  to  afford  no 
market  for  each  other's  superfluities."  Whatever  services, 
however,  Say  may  have  rendered  by  original  ideas  on  those  or 
other  subjects,  his  great  merit  is  certainly  that  of  a  propa- 
gandist and  populariser. 

The  imperial  police  would  not  permit  a  second  edition  of 
his  work  to  be  issued  without  the  introduction  of  changes 
which,  with  noble  independence,  he  refused  to  make ;  and 
that  edition  did  not  therefore  appear  till  1814.  Three  other 
editions  were  published  during  the  life  of  the  author — in  1817, 
1819,  and  1826.  In  1828  Say  published  a  second  treatise, 
Cours  complet  d' Economic  Politique  pratique,  which  contained 
the  substance  of  his  lectures  at  the  Conservatoire  des  Arts  et 
Metiers  and  at  the  College  de  France.  Whilst  in  his  earlier 
treatise  he  had  kept  within  the  narrow  limits  of  strict  econo- 
mics, in  his  later  work  he  enlarged  the  sphere  of  discussion, 
introducing  in  particular  many  considerations  respecting  the 
economic  influence  of  social  institutions. 

Jean  Charles  L.  Simonde  de  Sismondi  (1773-1842),  author 
of  the  Histoire  des  Republiques  Italiennes  du  moyen  dge, 
represents  in  the  economic  field  a  protest,  founded  mainly 
on  humanitarian  sentiment,  against  the  dominant  doctrines. 
He  wrote  first  a  treatise  De  la  Richesse  Oommerciale  (1803), 
in  which  he  Allowed  strictly  the  principles  of  Adam  Smith. 
But  he  af  iei  .vards  came  to  regard  these  principles  as  insuffi- 
cient and  requiring  modification.  He  contributed  an  article  on 


166  POLITICAL  ECONOMY. 

political  economy  to  the  Edinburgh  Encyclopaedia,  in  which 
his  new  views  were  partially  indicated.  They  were  fully  de- 
veloped in  his  principal  economic  work,  Nouveaux  Principe* 
d'jZconomie  Politique,  ou  de  la  Richesse  dans  ses  rapports  avec 
la  Population  (1819  ;  2d  ed.,  1827).  This  work,  as  he  tells 
us,  was  not  received  with  favour  by  economists,  a  fact  which 
he  explains  by  the  consideration  that  he  had  "  attacked  an 
orthodoxy — an  enterprise  dangerous  in  philosophy  as  in  reli- 
gion." According  to  his  view,  the  science,  as  commonly 
understood,  was  too  much  of  a  mere  chrematistic :  it  studied 
too  exclusively  the  means  of  increasing  wealth,  and  not 
sufficiently  the  use  of  this  wealth  for  producing  general 
happiness.  The  practical  system  founded  on  it  tended,  as 
he  believed,  not  only  to  make  the  rich  richer,  but  to  make 
the  poor  poorer  and  more  dependent ;  and  he  desired  to  fix 
attention  on  the  question  of  distribution  as  by  far  the  most 
important,  especially  in  the  social  circumstances  of  recent 
times. 

The  personal  union  in  Sismondi  of  three  nationalities,  the 
Italian,  the  French,  and  the  Swiss,  and  his  comprehensive 
historical  studies,  gave  him  a  special  largeness  of  view ;  and 
he  was  filled  with  a  noble  sympathy  for  the  suffering  members 
of  society.  He  stands  nearer  to  socialism  than  any  other 
French  economist  proper,  but  it  is  only  in  sentiment,  not  in 
opinion,  that  he  approximates  to  it ;  he  does  not  recommend 
my  socialistic  scheme.  On  the  contrary,  he  declares  in  a 
memorable  passage  that,  whilst  he  sees  where  justice  lies,  he 
must  confess  himself  unable  to  suggest  the  means  of  realising 
it  in  practice ;  the  division  of  the  fruits  of  industry  between 
those  who  are  united  in  their  production  appears  to  him 
vicious ;  but  it  is,  in  his  judgment,  almost  beyond  human 
power  to  conceive  any  system  of  property  absolutely  different 
from  that  which  is  known  to  us  by  experience.  He  goes  no 
further  than  protesting,  in  view  of  the  great  evils  which  he 
saw  around  him,  against  the  doctrine  of  laisser  faire,  and 
invoking,  somewhat  vaguely,  the  intervention  of  Governments 


SYSTEM  OF  NATURAL  LIBERTY.  167 

to  "  regulate  the  progress  of  wealth  "  and  to  protect  the  weaker 
members  of  the  community. 

His  frank  confession  of  impotence,  far  wiser  and  more 
honourable  than  the  suggestion  of  precipitate  and  dangerous 
remedies,  or  of  a  recurrence  to  outworn  mediaeval  institutions, 
has  not  affected  the  reputation  of  the  work.  A  prejudice  was 
indeed  early  created  against  it  in  consequence  of  its  partial 
harmony  of  tone,  though,  as  we  have  seen,  not  of  policy,  with 
socialism,  which  was  then  beginning  to  show  its  strength,  as 
well  as  by  the  rude  way  in  which  his  descriptions  of  the 
modern  industrial  system,  especially  as  it  existed  in  England, 
disturbed  the  complacent  optimism  of  some  members  of  the 
•o-called  orthodox  school.  These  treated  the  book  with  ill- 
disguised  contempt,  and  Bastiat  spoke  of  it  as  preaching  an 
economie  politique  cb  rebours.  But  it  has  held  its  place  in  the 
literature  of  the  science,  and  is  now  even  more  interesting 
than  when  it  first  appeared,  because  in  our  time  there  is  a 
more  general  disposition,  instead  of  denying  or  glossing  over 
the  serious  evils  of  industrial  society,  to  face  and  remove  or  at 
least  mitigate  them.  The  laisser  faire  doctrine,  too,  has  been 
discredited  in  theory  and  abandoned  in  practice ;  and  we  are 
ready  to  admit  Sismondi's  view  of  the  State  as  a  power  not 
merely  intrusted  with  the  maintenance  of  pe-ice,  but  charged 
also  with  the  mission  of  extending  the  benefits  of  the  social 
union  and  of  modern  progress  as  widely  as  possible  through 
all  classes  of  the  community.  Yet  the  impression  which  his 
treatise  leaves  behind  it  is  a  discouraging  one ;  and  this  be- 
cause he  regards  as  essentially  evil  many  things  which  seem 
to  be  the  necessary  results  of  the  development  of  industry. 
The  growth  of  a  wealthy  capitalist  class  and  of  manufacture 
on  the  great  scale,  the  rise  of  a  vast  body  of  workers  who  live 
by  their  labour  alone,  the  extended  application  of  machines, 
large  landed  properties  cultivated  with  the  aid  of  the  most 
advanced  appliances — all  these  he  dislikes  and  deprecates  ; 
but  they  appear  to  be  inevitable.  The  problem  is,  how  to 
regulate  and  moralise  the  system  they  imply ;  but  we  must 


168  POLITICAL  ECONOMY. 

surely  accept  it  in  principle,  unless  we  aim  at  a  thorough 
social  revolution.  Sismondi  may  be  regarded  as  the  precursor 
of  the  German  economists  known  under  the  inexact  desig- 
nation of  "  Socialists  of  the  Chair ; "  but  their  writings  are 
much  more  hopeful  and  inspiring. 

To  the  subject  of  population  he  devotes  special  care,  as  of 
great  importance  for  the  welfare  of  the  working  classes.  So 
far  as  agriculturists  are  concerned,  he  thinks  the  system  of 
what  he  calls  patriarchal  exploitation,  where  the  cultivator  ia 
also  proprietor,  and  is  aided  by  his  family  in  tilling  the  land 
— a  law  of  equal  division  among  the  natural  heirs  being 
apparently  presupposed — the  one  which  is  most  efficacious  in 
preventing  an  undue  increase  of  the  population.  The  father 
is,  in  such  a  case,  able  distinctly  to  estimate  the  resourcea 
available  for  his  children,  and  to  determine  the  stage  of  sub- 
division which  would  necessitate  the  descent  of  the  family 
from  the  material  and  social  position  it  had  previously  occu- 
pied. When  children  beyond  this  limit  are  born,  they  do  not 
marry,  or  they  choose  amongst  their  number  one  to  continue 
the  race.  This  is  the  view  which,  adopted  by  J.  S.  Mill, 
makes  so  great  a  figure  in  the  too  favourable  presentation  by 
that  writer  of  the  system  of  peasant  proprietors. 

In  no  French  economic  writer  is  greater  force  or  general 
solidity  of  thought  to  be  found  than  in  Charles  Dunoyer 
(1786-1862),  author  of  La  Libert^  du  Travail  (1845;  the 
substance  of  the  first  volume  had  appeared  under  a  different 
title  in  1825),  honourably  known  for  his  integrity  and  inde- 
pendence under  the  regime  of  the  Restoration.  What  makes 
him  of  special  importance  in  the  history  of  the  science  ia 
his  view  of  its  philosophical  constitution  and  method.  With 
respect  to  method,  he  strikes  the  keynote  at  the  very  outset 
in  the  words  "  rechercher  experimentalement,"  and  in  profes- 
sing to  build  on  "  les  donnees  de  1'observation  et  de  I'exp&ri- 
ence."  He  shows  a  marked  tendency  to  widen  economics 
into  a  general  science  of  society,  expressly  describing  political 
economy  as  having  for  its  province  the  whole  order  of  things 


SYSTEM  OF  NATURAL  LIBERTY.  169 

which  results  from  the  exercise  and  development  of  the  social  '} 
forces.  This  larger  study  is  indeed  better  named  Sociology ; 
and  economic  studies  are  better  regarded  as  forming  one  depart- 
ment of  it.  But  the  essential  circumstance  is  that,  in  Duncyer's 
treatment  of  his  great  subject,  the  widest  intellectual,  moral, 
and  political  considerations  are  inseparably  combined  with 
purely  economic  ideas.  It  must  not  be  supposed  that  by 
liberty,  in  the  title  of  his  work,  is  meant  merely  freedom 
from  legal  restraint  or  administrative  interference ;  he  uses  it 
to  express  whatever  tends  to  give  increased  efficiency  to  labour. 
He  is  thus  led  to  discuss  all  the  causes  of  human  progress, 
and  to  exhibit  them  in  their  historical  working. 

Treating,  in  the  first  part,  of  the  influence  of  external  con- 
ditions, of  race,  and  of  culture  on  liberty  in  this  wider  sense, 
he  proceeds  to  divide  all  productive  effort  into  two  great 
classes,  according  as  the  action  is  exercised  on  things  or  on 
men,  and  censures  the  economists  for  having  restricted  their 
attention  to  the  former.  He  studies  in  his  second  and  third 
parts  respectively  the  conditions  of  the  efficiency  of  these 
two  forms  of  human  exertion.  In  treating  of  economic  life, 
strictly  so  called,  he  introduces  his  fourfold  division  of  material 
industry,  in  part  adopted  by  J.  S.  Mill,  as  "  (i)  extractive, 
(2)  voituriere,  (3)  manufacturiere,  (4)  agricole,"  a  division 
which  is  useful  for  physical  economics,  but  will  always,  when 
the  larger  social  aspect  of  things  is  considered,  be  inferior 
to  the  more  commonly  accepted  one  into  agricultural,  manu- 
facturing, and  commercial  industry,  banking  being  supposed 
as  common  president  and  regulator.  Dunoyer,  having  in  view 
only  action  on  material  objects,  relegates  banking,  as  well  as 
commerce  proper,  to  the  separate  head  of  exchange,  which, 
along  with  association  and  gratuitous  transmission  (whether 
inter  vivos  or  mortis  causa),  he  classes  apart  as  being,  not  :A- 
dustries,  in  the  same  sense  with  the  occupations  named,  but 
yet  functions  essential  to  the  social  economy.  The  industries 
which  act  on  man  he  divides  according  as  they  occupy  them- 
selves with  (i)  the  amelioration  of  our  physical  nature,  (») 


170  POLITICAL  ECONOMY. 

the  culture  of  our  imagination  and  sentiments,  (3)  the  edu» 
cation  of  our  intelligence,  and  (4)  the  improvement  of  oui 
moral  habits ;  and  he  proceeds  accordingly  to  study  the  social 
offices  of  the  physician,  the  artist,  the  educator,  and  the  priest. 
|  We  meet  in  Dunoyer  the  ideas  afterwards  emphasised  by 
/    Bastiat  that  the  real  subjects  of  human  exchange  are  services ; 
|     that  all  value  is  due  to  human  activity  ;  that  the  powers  of 
nature  always  render  a  gratuitous^assistance  to  the  labour  of 
/     noan ;  and  that  the  rent  of  land  is  really  a  form  of  interest  on 
invested  capital.     Though  he  had  disclaimed  the  task  of  a 
practical  adviser  in  the  often-quoted  sentence — "  Je  n'impose 
rien ;  je  ne  propose  meine  rien ;  j'expose,"  he  finds  himself, 
like  all  economists,  unable  to  abstain  from  offering  counsel. 
And  his  policy  is  opposed  to  any  state  interference  with  in- 
«T  dustry.     Indeed  he  preaches  in  its  extreme  rigour  the  laisser 
^tfaire  doctrine,  which  he  maintains  principally  on  the  ground 
that  the  spontaneous  efforts  of  the  individual  for  the  improve- 
ment of  his  condition,  by  developing  foresight,  energy,  and 
perseverance,  are  the  most  efficient  means  of  social  culture. 
But  he  certainly  goes  too  far  when  he  represents  the  action 
of   Governments   as  normally  always   repressive   and   never 
directive.     He  was  doubtless  led  into  this  exaggeration  by 
his  opposition  to  the  artificial  organisations  of  labour  proposed 
by  so  many  of  his  contemporaries,  against  which  he  had  to 
vindicate  the  principle  of  competition ;  but  his  criticism  of 
these  schemes  took,  as  Comte  remarks,  too  absolute  a  character, 
tending  to  the  perpetual  interdiction  of  a  true  systematisation 
of  industry.1 

AMERICA. 

At  this  point  it  will  be  convenient  to  turn  aside  and  notice 
the  doctrines  of  the  American  economist  Carey.  Not  much 
had  been  done  before  him  in  the  science  by  citizens  of  the 
United  States.  Benjamin  Franklin,  otherwise  of  world-wide 

1  The  French  economists  are  continued  on  page  175. 


SYSTEM  OF  NATURAL  LIBERTY.  171 

renown,  was  author  of  a  number  of  tracts,  in  most  of  which 
he  merely  enforces  practical  lessons  of  industry  and  thrift, 
but  in  some  throws  out  interesting  theoretic  ideas.  Thus, 
fifty  years  before  Smith,  he  suggested  (as  Petty,  however,  had 
already  done)  human  labour  as  the  true  measure  of  value 
(Modest  Inquiry  into  the  Nature  and  Necessity  of  a  Paper 
Currency,  1721),  and  in  his  Observations  concerning  the  In- 
c^ase  of  Mankind  (1751)  he  expresses  views  akin  to  those  i*f 
Malthus.  Alexander  Hamilton,  secretary  of  the  treasury,  in 
1791  presented  in  his  official  capacity  to  the  House  of  Repre- 
sentatives of  the  United  States  a  Report  on  the  measures  by 
which  home  manufactures  could  be  promoted.1  In  this  docu- 
ment he  gives  a  critical  account  of  the  theory  of  the  subject, 
represents  Smith's  system  of  free  trade  as  possible  in  prac- 
tice only  if  adopted  by  all  nations  simultaneously,  ascribes 
to  manufactures  a  greater  productiveness  than  to  agriculture, 
and  seelfs  to  refute  the  objections  against  the  development 
of  the  former  in  America  founded  on  the  want  of  capital,  the 
high  rate  of  wages,  and  the  low  price  of  land.  The  conclusion 
at  which  he  arrives  is  that  for  the  creation  of  American  manu- 
factures a  system  of  moderate  protective  duties  was  necessary, 
and  he  proceeds  to  describe  the  particular  features  of  such  a 
system.  There  is  some  reason  to  believe  that  the  German 
economist  List,  of  whom  we  shall  speak  hereafter,  was  in- 
fluenced by  Hamilton's  work,  having,  during  his  exile  from 
his  native  country,  resided  in  the  United  States. 

Henry  Charles  Carey  (1793-1879),  son  of  an  American 
citizen  who  had  emigrated  from  Ireland,  represents  a  reaction 
against  the  dispiriting  character  which  the  Smithiau  doctrines 
had  assumed  in  the  hands  of  Malthus  and  Ricardo.  His  aim 
was,  whilst  adhering  to  the  individualistic  economy,  to  place 
it  on  a  higher  and  surer  basis,  and  fortify  it  against  the 
assaults  of  socialism,  to  which  some  of  the  Ricardian  tenets 
had  exposed  it.  The  most  comprehensive  as  well  as  mature 
exposition  of  his  views  is  contained  in  his  Principles  of  Social 

1  Hamilton's  Works,  edited  by  H.  C.  Lodge,  vol.  iii.  p.  294. 


I7«  POLITICAL  ECONOMY. 

Science  (1859).  Inspired  with  the  optimistic  sentiment  natural 
t )  a  young  and  rising  nation  with  abundant  undeveloped 
resources  and  an  unbounded  outlook  towards  the  future, 

4,  he  seeks  to  show  that  there  exists,  independently  of  human 
wills,  a  natural  system  of  economic  laws,  which  is  essentially 
beneficent,  and  of  which  the  increasing  prosperity  of  the 

r  whole  community,  and  especially  of  the  working  classes,  ia 
/  the  spontaneous  result, — capable  of  being  defeated  only  by 
the  ignorance  or  perversity  of  man  resisting  or  impeding  its 
action.  He  rejects  the  Malthusian  doctrine  of  population, 
maintaining  that  numbers  regulate  themselves  sufficiently  in 
every  well-governed  society,  and  that  their  pressure  on  sub- 
sistence characterises  the  lower,  not  the  more  advanced,  stages 
of  civilisation.  He  rightly  denies  the  universal  truth,  for 
all  stages  of  cultivation,  of  the  law  of  diminishing  returns 
from  land.  His  fundamental  theoretic  position  relates  to  the 
antithesis  of  wealth  and  value. 

Wealth  had  been  by  most  economists  confounded  with  the 
sum  of  exchange  values ;  even  Smith,  though  at  first  distin- 
guishing them,  afterwards  allowed  himself  to  fall  into  this 
error.  Kicardo  had,  indeed,  pointed  out  the  difference,  but 
only  towards  the  end  of  his  treatise,  in  the  body  of  which  value 
alone  is  considered.  The  later  English  economists  had  tended 
to  regard  their  studies  as  conversant  only  with  exchange  ;  so 
far  had  this  proceeded  that  Whately  had  proposed  for  the 
science  the  name  of  Catallactics.  When  wealth  is  considered 
as  what  it  really  is,  the  sum  of  useful  products,  we  see  that 
it  has  its  origin  in  external  nature  as  supplying  both  materials 
and  physical  forces,  and  in  human  labour  as  appropriating  and 
adapting  those  natural  materials  and  forces.  Nature  gives 
her  assistance  gratuitously ;  labour  is  the  sole  foundation 
of  value.  The  less  we  can  appropriate  and  employ  natural 
forces  in  any  production  the  higher  the  value  of  the  product, 
but  the  less  the  addition  to  our  wealth  in  proportion  to  the 
labour  expended.  Wealth,  in  its  true  sense  of  the  sum  of 
useful  things,  is  the  measure  of  the  power  we  have  acquired 


SYSTEM  OF  NATURAL  LIBERTY.  173 

over  nature,  whilst  the  value  of  an  object  expresses  the 
resistance  of  nature  which  labour  has  tp  overcome  in  order 
to  produce  the  object.  Wealth  steadily  increases  in  the 
course  of  social  progress ;  the  exchange  value  of  objects,  on 
the  other  hand,  decreases.  Human  intellect  and  faculty  of 
social  combination  secure  increased  command  over  natural 
powers,  and  use  them  more  largely  in  production,  whilst  less 
labour  is  spent  in  achieving  each  result,  and  the  value  of  the 
product  accordingly  falls.  The  value  of  the  article  is  not  fixed 
by  its  cost  of  production  in  the  past ;  what  really  determines 
it  is  the  cost  which  is  necessary  for  its  reproduction  under  the 
present  conditions  of  knowledge  and  skill.  The  dependence 
of  value  on  cost,  so  interpreted,  Carey  holds  to  be  universally 
true ;  whilst  Ricardo  maintained  it  only  with  respect  to  objects 
capable  of  indefinite  multiplication,  and  in  particular  did  not 
regard  it  as  applicable  to  the  case  of  land.  Kicardo  saw  in 
the  productive  powers  of  land  a  free  gift  of  nature  which  had 
been  monopolised  by  a  certain  number  of  persons,  and  which 
became,  with  the  increased  demand  for  food,  a  larger  and 
larger  value  in  the  hands  of  its  possessors.  To  this  value, 
however,  as  not  being  the  result  of  labour,  the  owner,  it  might 
be  maintained,  had  no  rightful  claim ;  he  could  not  justly 
demand  a  payment  for  what  was  done  by  the  "  original  and 
indestructible  powers  of  the  soil."  But  Carey  held  that  land, 
as  we  are  concerned  with  it  in  industrial  life,  is  really  an 
instrument  of  production  which  has  been  formed  as  such  by 
man,  and  that  its  value  is  due  to  the  labour  expended  on  it 
in  the  past, — though  measured,  not  by  the  sum  of  that  labour, 
but  by  the  labour  necessary  under  existing  conditions  to  bring 
new  land  to  the  same  stage  of  productiveness.  He  studies 
the  occupation  and  reclamation  of  land  with  peculiar  advantage 
as  an  American,  for  whom  the  traditions  of  first  settlement 
are  living  and  fresh,  and  before  whose  eyes  the  process  is 
indeed  still  going  on.  The  difficulties  of  adapting  a  primitive 
soil  to  the  work  of  yielding  organic  products  for  man's  use 
can  be  lightly  estimated  only  by  an  inhabitant  of  a  country 


174  POLITICAL  ECONOMY. 

long  under  cultivation.  It  is,  in  Carey's  viewT  the  overcoming 
of  tliese  difficulties  by  arduous  and  continued  effort  that  ontitles 
)  the  first  occupier  of  land  to  his  property  in  the  soil.  Its  pre- 
sent value  forms  a  very  small  proportion  of  the  cost  expended 
on  it,  because  it  represents  only  what  would  be  required,  with 
the  science  and  appliances  of  our  time,  to  bring  the  land 
from  its  primitive  into  its  present  state.  Property  in  land  is 
therefore  only  a  form  of  invested  capital — a  quantity  of  labour 
or  the  fruits  of  labour  permanently  incorporated  with  the  soil ; 
for  which,  like  any  other  capitalist,  the  owner  is  compensated 
by  a  share  of  the  produce.  He  is  not  rewarded  for  what  is 
done  by  the  powers  of  nature,  and  society  is  in  no  sense 
defrauded  by  his  sole  possession.  The  so-called  Ricardian 
I  theory  of  rent  is  a  speculative  fancy,  contradicted  by  all 
experience.  Cultivation  does  not  in  fact,  as  that  theory 
supposes,  begin  with  the  best,  and  move  downwards  to  the 
poorer  soils  in  the  order  of  their  inferiority.1  The  light  and 
dry  higher  lands  are  first  cultivated ;  and  only  when  popula- 
tion has  become  dense  and  capital  has  accumulated,  are  the 
low-lying  lands,  with  their  greater  fertility,  but  also  with  their 
morasses,  inundations,  and  miasmas,  attacked  and  brought  into 
occupation.  Rent,  regarded  as  a  proportion  of  the  produce, 
.  sinks,  like  all  interest  on  capital,  in  process  of  time,  but,  as  an 
absolute  amount,  increases.  The  share  of  the  labourer  increases, 
both  as  a  proportion  and  an  absolute  amount.  Arid  thus  the 
interests  of  these  different  social  classes  are  in  harmony. 

But,  Carey  proceeds  to  say,  in  order  that  this  harmonious 
progress  may  be  realised,  what  is  taken  from  the  land  must 
be  given  back  to  it.  All  the  articles  derived  from  it  are 
really  separated  parts  of  it,  which  must  be  restored  on  pain  of 
its  exhaustion.  Hence  the  producer  and  the  consumer  must 
be  close  to  each  other ;  the  products  must  not  be  exported  to 
a  foreign  country  in  exchange  for  its  manufactures,  and  thus 
go  to  enrich  as  manure  a  foreign  soil.  In  immediate  exchange 

1  It  is,  however,  a  mistake  to  suppose  that  the  assumption  of  this 
historical  order  of  descent  is  essential  to  the  theory  in  question. 


SYSTEM  OF  NATURAL  LIBERTY.  175 

value  the  landowner  may  gain  by  such  exportation,  but  the 
productive  powers  of  the  land  will  suffer.  And  thus  Carey, 
who  had  set  out  as  an  earnest  advocate  of  free  trade,  arrives 
at  the  doctrine  of  protection :  the  "  co-ordinating  power "  in 
society  must  intervene  to  prevent  private  advantage  from 
working  public  mischief.1  He  attributes  his  conversion  on 
the  question  to  his  observation  of  the  effects  of  liberal  and 
protective  tariffs  respectively  on  American  prosperity.  This 
observation,  he  says,  threw  him  back  on  theory,  and  led  him 
to  see  that  the  intervention  referred  to  might  be  necessary 
to  remove  (as  he  phrases  it)  the  obstacles  to  the  progress 
of  younger  communities  created  by  the  action  of  older  and 
wealthier  nations.  But  it  seems  probable  that  the  influence 
of  List's  writings,  added  to  his  own  deep-rooted  and  hereditary 
jealousy  and  dislike  of  English  predominance,  had  something 
to  do  with  his  change  of  attitude. 

The  practical  conclusion  at  which  he  thus  arrived,  though 
it  is  by  no  means  in  contradiction  to  the  doctrine  of  the 
existence  of  natural  economic  laws,  accords  but  ill  with  his 
optimistic  scheme ;  and  another  economist,  accepting  his  funda- 
mental ideas,  applied  himself  to  remove  the  foreign  accretion, 
as  he  regarded  it,  and  to  preach  the  theory  of  spontaneous 
social  harmonies  in  relation  with  the  practice  of  free  trade  as 
its  legitimate  outcome.2 

FRANCE — (Continued). 
Frederic    Bastiat    (1801-1850),    though    not    a    profound 

1  This  argument  seems  scarcely  met  by  Professor  F.  A.  Walker,  Political 
Economy,  50-52.  But  perhaps  he  is  right  in  thinking  that  Carey  exagge- 
rates the  importance  of  the  considerations  on  which  it  is  founded.  Mill 
and  Leslie  remark  that  the  transportation  of  agricultural  products  from 
the  western  to  the  Atlantic  States  has  the  same  effect  as  their  export  to 
Europe,  so  far  as  this  so-called  "  land-butchery '  is  concerned  ;  besides, 
tome  manures  are  obtainable  from  abroad. 

8  Other  writings  of  Carey's  besides  his  Somal  Science  are  his  Essay  on 
the  Rate  of  Wages  (1835)  '•>  Principles  of  Political  Economy  (1838-1840); 
Past,  Present,  and  Future  (1848) ;  Unity  of  Law  (1872). 


176  POLITICAL  ECONOMY. 

thinker,  was  a  brilliant  and  popular  writer  on  economic  ques- 
tions. Though  he  always  had  an  inclination  for  such  stucliess 
he  was  first  impelled  to  the  active  propagation  of  his  views 
by  his  earnest  sympathy  with  the  English  anti-corn-law  agita- 
tion. Naturally  of  an  ardent  temperament,  he  threw  himself 
with  zeal  into  the  free-trade  controversy,  through  which  he 
hoped  to  influence  French  economic  policy,  and  published  in 
1845  a  history  of  the  struggle  under  the  title  of  Cobden  et 
la  Ligue.  In  1845—48  appeared  his  Sophismes  Bconomiques 
(Eng.  trans,  by  P.  J.  Stirling,  1873),  in  which  he  exhibited 
his  best  qualities  of  mind.  Though  Cairnes  goes  too  far  in 
comparing  this  work  with  the  Lettres  Provinciates,  it  is  cer- 
tainly marked  by  much  liveliness,  point,  and  vigour.  But  to 
expose  the  absurdities  of  the  ordinary  protectionism-  was  no 
difficult  task ;  it  is  only  in  such  a  form  as  the  policy  assumed 
in  the  scheme  of  List,  as  purely  provisional  and  preparatory, 
that  it  deserves  and  demands  consideration.  After  the  revolu- 
tion of  1848,  which  for  a  time  put  an  end  to  the  free-trade 
movement  in  France,  the  efforts  of  Bastiat  were  directed 
against  the  socialists.  Besides  several  minor  pieces  possessing 
the  same  sort  of  merit  as  the  Sophismes,  he  produced,  with 
a  view  to  this  controversy,  his  most  ambitious  as  well  as 
characteristic  work,  the  Harmonies  ficonomiques  (Eng.  trans, 
by  P.  J.  Stirling,  1860).  Only  the  first  volume  was  published; 
it  appeared  in  1850,  and  its  author  died  in  the  same  year. 
Since  then  the  notes  and  sketches  which  he  had  prepared  as 
materials  towards  the  production  of  the  second  volume  have 
been  given  to  the  public  in  the  collected  edition  of  his 
writings  (by  Paillottet,  with  Life  by  Fontenay,  7  vols.),  and 
we  can  thus  gather  what  would  have  been  the  spirit  and 
substance  of  the  later  portions  of  the  book. 

It  will  always  be  historically  interesting  as  the  last  incar- 
nation of  thorough-going  economic  optimism.  This  optimism, 
recurring  to  its  first  origin,  sets  out  from  theological  considera- 
tions, and  Bastiat  is  commended  by  his  English  translator  for 
treating  political  economy  "in  connection  with  final  causes." 


SYSTEM  OF  NATURAL  LIBERTY.  177 

The  spirit  of  the  work  is  to  represent  "all  principles,  all 
motives,  all  springs  of  action,  all  interests,  as  co-operating 
towards  a  grand  final  result  which  humanity  will  never  reach, 
but  to  which  it  will  always  increasingly  tend,  namely,  the 
indefinite  approximation  of  all  classes  towards  a  level,  which 
steadily  rises, — in  other  words,  the  equalisation  of  individuals 
in  the  general  amelioration." 

What  claimed  to  be  novel  and  peculiar  in  his  scheme  was 
principally  his  theory  of  value.  Insisting  on  the  idea  that 
value  does  not  denote  anything  inherent  in  the  objects  to 
which  it  is  attributed,  he  endeavoured  to  show  that  it  never 
signifies  anything  but  the  ratio  of  two  "  services."  This  view 
he  develops  with  great  Variety  ted  ielicity  of  illustration. 
Only  the  mutual  services  of  human  beings,  according  to  him, 
possess  value  and  can  claim  a  retribution  ;  the  assistance  given 
by  nature  to  the  work  of  production  is  always  purely  gratui- 
tous, and  never  enters  into  price.  Economic  progress,  as,  for 
example,  the  improvement  and  larger  use  of  machinery,  tends 
perpetually  to  transfer  more  and  more  of  the  elements  of 
utility  from  the  domain  of  property,  and  therefore  of  value, 
into  that  of  community,  or  of  universal  and  unpurchased 
enjoyment  It  will  be  observed  that  this  theory  is  substanti- 
ally identical  with  Carey's,  which  had  been  earlier  propounded ; 
and  the  latter  author  in  so  many  words  alleges  it  to  have  been 
taken  from  him  without  acknowledgment.  It  has  not  perhaps 
been  sufficiently  attended  to  that  very  similar  views  are  found 
in  Dunoyer,  of  whose  work  Bastiat  spoke  as  exercising  a 
powerful  influence  on  "  the  restoration  of  the  science,"  and 
whom  Fontenay,  the  biographer  of  Bastiat,  tells  us  he  recog- 
nised as  one  of  his  misters,  Charles  Comte  l  being  the  other. 

The  mode  which  has  just  been  explained  of  conceiving 
industrial  action  and  industrial  progress  is  interesting  and 

1  Charles  Comte  (1782-1837)  was  son-in-law  of  J.  B.  Say.  He  waa 
associated  with  Dunoyer  in  his  political  writings  and,  like  him,  distin- 
guished for  his  honourable  independence.  He  was  author  of  the  TraM 
de  Leyitlation,  a  meritorious  and  useful,  but  not  a  profound  work. 


178  POLITICAL  ECONOMY. 

instructive  so  far  as  it  is  really  applicable,  but  it  was  unduly 
generalised.  Cairnes  has  well  pointed  out  that  Bastiat's 
theoretic  soundness  was  injuriously  affected  by  his  habit  of 
studying  doctrines  with  a  direct  view  to  contemporary  social 
and  political  controversies.  He  was  thus  predisposed  to 
accept  views  which  appeared  to  lend  a  sanction  to  legitimate 
and  valuable  institutions,  and  to  reject  those  which  seemed  to 
him  to  lead  to  dangerous  consequences.  His  constant  aim 
is,  as  he  himself  expressed  it,  to  "  break  the  weapons "  of 
anti-social  reasoners  "  in  their  hands,"  and  this  preoccupation 
interferes  with  the  single-minded  effort  towards  the  attainment 
of  scientific  truth.  The  creation  or  adoption  of  his  theory  of 
value  was  inspired  by  the  wish  to  meet  the  socialistic  criticism 
of  property  in  land ;  for  the  exigencies  of  this  controversy  it 
was  desirable  to  be  able  to  show  that  nothing  is  ever  paid  for 
except  personal  effort.  His  view  of  rent  was,  therefore,  so  to 
speak,  foreordained,  though  it  may  have  been  suggested,  aa 
indeed  the  editor  of  his  posthumous  fragments  admits,  by  the 
writings  of  Carey.  He  held,  with  the  American  author,  that 
rent  is  purely  the  reward  of  the  pains  and  expenditure  of  the 
landlord  or  his  predecessors  in  the  process  of  converting  the 
natural  soil  into  &  farm  by  clearing,  draining,  fencing,  and  the 
other  species  of  permanent  improvements.1  He  thus  gets  rid 
of  the  (so-called)  Ricardian  doctrine,  which  was  accepted  by 
the  socialists,  and  by  them  used  for  the  purpose  of  assailing 
the  institution  of  landed  property,  or,  at  least,  of  supporting  a 
claim  of  compensation  to  the  community  for  the  appropriation 
of  the  land  by  the  concession  of  the  "  right  to  labour."  As 
Cairnes  has  said,2  "  what  Bastiat  did  was  this  :  having  been 
at  infinite  pains  to  exclude  gratuitous  gifts  of  nature  from  the 
possible  elements  of  value,  and  pointedly  identified  "  [rather, 
associated]  "  the  phenomenon  with  '  human  effort '  as  its 

1  M.  Leroy-Beaulieu  maintains  ( Essai  sur  la  Repartition  des  Richessei, 
2d  ed.,  1882)  that  this,  though  not  strictly,  is  approximately  true — that 
economic  forms  a  very  small  part  of  actual  rent. 

8  Estays  in  Political  Economy,  p.  334. 


SYSTEM  OF  NATURAL  LIBERTY.  179 

exclusive  source,  he  designates  human  effort  by  the  term 
'  service,'  and  then  employs  this  term  to  admit  as  sources  of 
value  those  very  gratuitous  natural  gifts  the  exclusion  of 
which  in  this  capacity  constituted  the  essence  of  his  doctrine." 
The  justice  of  this  criticism  will  be  apparent  to  any  one  who 
considers  the  way  in  which  Bastiat  treats  the  question  of  the 
value  of  a  diamond.  That  what  is  paid  for  in  most  cases  of 
human  dealings  is  effort  no  one  can  dispute.  But  it  is  surely 
a  reductio  ad  dbsurdum  of  his  theory  of  value,  regarded  as  a 
doctrine  of  universal  application,  to  represent  the  price  of  a 
diamond  which  has  been  accidentally  found  as  remuneration 
for  the  effort  of  the  finder  in  appropriating  and  transmitting 
it.  And,  with  respect  to  land,  whilst  a  large  part  of  rent,  in 
the  popular  sense,  must  be  explained  as  interest  on  capital, 
it  is  plain  that  the  native  powers  of  the  soil  are  capable  of 
appropriation,  and  that  then  a  price  can  be  demanded  and  will 
be  paid  for  their  use. 

Bastiat  is  weak  on  the  philosophical  side ;  he  is  filled  with 
the  ideas  of  theological  teleology,  and  is  led  by  these  ideas  to 
form  a  priori  opinions  of  what  existing  facts  and  laws  must 
necessarily  be.  And  the  jus  naturae,  which,  like  metaphysical 
ideas  generally,  has  its  root  in  theology,  is  as  much  a  postu- 
late with  him  as  with  the  physiocrats.  Thus,  in  his  essay 
on  Free  Trade,  he  says  : — "  Exchange  is  a  natural  right  like 
property.  Every  citizen  who  has  created  or  acquired  a  product 
ought  to  have  the  option  of  either  applying  it  immediately  to 
his  own  use  or  ceding  it  to  whosoever  on  the  surface  of  the 
globe  consents  to  give  him  in  exchange  the  object  of  his 
desires."  Something  of  the  same  sort  had  been  said  by 
Turgot ;  and  in  his  time  this  way  of  regarding  things  was 
excusable,  and  even  provisionally  useful;  but  in  the  middle 
of  the  i  Qth  century  it  was  time  that  it  should  be  seen  through 
and  abandoned. 

Bastiat  had  a  real  enthusiasm  for  a  science  which  he  thought 
destined  to  render  great  services  to  mankind,  and  he  seems 
to  have  believed  intensely  the  doctrines  which  gave  a  special 


i8o  POLITICAL  ECONOMY. 

colour  to  his  teaching.  If  his  optimistic  exaggerations  favoured 
the  propertied  classes,  they  certainly  were  not  prompted  by 
self-interest  or  servility.  But  they  are  exaggerations ;  and, 
amidst  the  modern  conflicts  of  capital  and  labour,  his  per- 
petual assertion  of  social  harmonies  is  the  cry  of  "  peace, 
peace,"  where  there  is  no  peace.  The  freedom  of  industry, 
which  he  treated  as  a  panacea,  has  undoubtedly  brought  with 
it  great  benefits ;  but  a  sufficient  experience  has  shown  that 
it  is  inadequate  to  solve  the  social  problem.  How  can  the 
advocates  of  economic  revolution  be  met  by  assuring  them 
that  everything  in  the  natural  economy  is  harmonious — that, 
in  fact,  all  they  seek  for  already  exists  ?  A  certain  degree  of 
spontaneous  harmony  does  indeed  exist,  for  society  could  not 
continue  without  it,  but  it  is  imperfect  and  precarious ;  the 
question  is,  How  can  we  give  to  it  the  maximum  of  complete- 
ness and  stability  ? 

Augustin  Cournot  (1801—1877)  appears  to  have  been  the 
first l  who,  with  a  competent  knowledge  of  both  subjects,  en- 
deavoured, to  apply  mathematics  to  the  treatment  of  economic 
questions.  His  treatise  entitled  Recherches  sur  les  Principes 
Mathematiques  de  la  Theorie  des  Richesses  was  published  in 
1838.  He  mentions  in  it  only  one  previous  enterprise  of  the 
same  kind  (though  there  had  in  fact  been  others) — that, 
namely,  of  Nicolas  Frangois  Canard,  whose  book,  published 
in  1802,  was  crowned  by  the  Institute,  though  "its  principles 
were  radically  false  as  well  as  erroneously  applied."  Not- 
withstanding Cournot's  just  reputation  as  a  writer  on  mathe- 
matics, the  Recherches  made  little  impression.  The  truth 
seems  to  be  that  his  results  are  in  some  cases  of  little  import- 
ance, in  others  of  questionable  correctness,  and  that,  in  the 
abstractions  to  which  he  has  recourse  in  order  to  facilitate  his 
calculations,  an  essential  part  of  the  real  conditions  of  the 
problem  is  sometimes  omitted.  His  pages  abound  in  symbols 

1  Hermann  Heinrich  Gossan's  work,  Entwickelung  der  Gesetze  det 
menschlichen  VerTcehrs,  so  highly  praised  by  Jevous,  Theory  of  Pol.  Meon., 
ad  ed.,  Pref.,  was  published  in  1854. 


SYSTEM  OF  NATURAL  LIBERTY.  181 

representing  unknown  functions,  the  form  of  the  function 
being  left  to  be  ascertained  by  observation  of  facts,  which  he 
does  not  regard  as  a  part  of  his  task,  or  only  some  known 
properties  of  the  undetermined  function  being  used  as  bases 
for  deduction.  Jevons  includes  in  his  list  of  works  in  which 
a  mathematical  treatment  of  economics  is  adopted  a  second 
treatise  which  Cournot  published  in  1863,  with  the  title 
Principes  de  la  Theorie  des  Richesses.  But  in  reality,  in  th6 
work  so  named,  which  is  written  with  great  ability,  and  con- 
tains much  forcible  reasoning  in  opposition  to  the  exaggera- 
tions of  the  ordinary  economists,  the  mathematical  method  is 
abandoned,  and  there  is  not  an  algebraical  formula  in  the  book. 
The  author  admits  that  the  public  has  always  shown  a  repug- 
nance to  the  use  of  mathematical  symbols  in  economic  dis- 
cussion, and,  though  he  thinks  they  might  be  of  service  in 
facilitating  exposition,  fixing  the  ideas,  and  suggesting  further 
developments,  he  acknowledges  that  a  grave  danger  attends 
their  use.  The  danger,  according  to  him,  consists  in  the 
probability  that  an  undue  value  may  be  attached  to  the 
abstract  hypotheses  from  which  the  investigator  sets  out,  and 
which  enable  him  to  construct  his  formulae.  And  his  practical 
conclusion  is  that  mathematical  processes  should  be  employed 
only  with  great  precaution,  or  even  not  employed  at  all  if  the 
public  judgment  is  against  them,  for  "this  judgment,"  he 
says,  "  has  its  secret  reasons,  almost  always  more  sure  than 
those  which  determine  the  opinions  of  individuals."  It  is  an 
obvious  consideration  that  the  acceptance  of  unsound  or  one- 
sided abstract  principles  as  the  premises  of  argument  does  not 
depend  on  the  use  of  mathematical  forms,  though  it  is  possible 
that  the  employment  of  the  latter  may  by  association  produce 
an  illusion  in  favour  of  the  certainty  of  those  premises.  But 
the  great  objection  to  the  use  of  mathematics  in  economic 
reasoning  is  that  it  is  necessarily  sterile.  If  we  examine  the 
attempts  which  have  been  made  to  employ  it,  we  shall  find 
that  the  fundamental  conceptions  on  which  the  deductions 
are  made  to  rest  are  vague,  indeed  metaphysical,  in  their 


182  POLITICAL  ECONOMY. 

character.  Units  of  animal  or  moral  satisfaction,  of  utility, 
and  the  like,  are  as  foreign  to  positive  science  as  a  unit  of 
dormitive  faculty  would  be ;  and  a  unit  of  value,  unless  we 
understand  by  value  the  quantity  of  one  commodity  exchange- 
able under  given  conditions  for  another,  is  an  equally  indefinite 
idea.  Mathematics  can  indeed  formulate  ratios  of  exchange 
when  they  have  once  been  observed ;  but  it  cannot  by  any 
process  of  its  own  determine  those  ratios,  for  quantitative 
conclusions  imply  quantitative  premises,  and  these  are  want- 
ing. There  is  then  no  future  for  this  kind  of  study,  and  it 
is  only  waste  of  intellectual  power  to  pursue  it.  But  the  im- 
portance of  mathematics  as  an  educational  introduction  to  all 
the  higher  orders  of  research  is  not  affected  by  this  conclusion. 
The  study  of  the  physical  medium,  or  environment,  in  which 
economic  phenomena  take  place,  and  by  which  they  are 
affected,  requires  mathematics  as  an  instrument ;  and  nothing 
can  ever  dispense  with  the  didactic  efficacy  of  that  science, 
as  supplying  the  primordial  type  of  rational  investigation, 
giving  the  lively  sentiment  of  decisive  proof,  and  disinclining 
the  mind  to  illusory  conceptions  and  sophistical  combinations. 
And  a  knowledge  of  at  least  the  fundamental  principles  of 
mathematics  is  necessary  to  economists  to  keep  them  right  in 
their  statements  of  doctrine,  and  prevent  their  enunciating 
propositions  which  have  no  definite  meaning.  Even  dis- 
tinguished writers  sometimes  betray  a  serious  deficiency  in 
this  respect ;  thus  they  assert  that  one  quantity  "  varies  in- 
versely as "  another,  when  what  is  meant  is  that  the  sum 
(not  the  product)  of  the  two  is  constant ;  and  they  treat  as 
capable  of  numerical  estimation  the  amount  of  an  aggregate 
of  elements  which,  differing  in  kind,  cannot  be  reduced  to  a 
common  standard.  As  an  example  of  the  latter  error,  it  may 
be  mentioned  that  "  quantity  of  labour,"  so  often  spoken  of 
by  Kicardo,  and  in  fact  made  the  basis  of  his  /stem,  includes 
such  various  species  of  exertion  as  will  not  admit  of  summa- 
tion or  comparison. 


SYSTEM  OF  NATURAL  LIBERTY.  183 

ITALY. 

The  first  Italian  translation  of  the  Wealth  of  NaMont 
appeared  in  1780.  The  most  distinguished  Italian  economist 
of  the  period  here  dealt  with  was,  however,  no  disciple  of 
Smith.  This  was  Melchiorre  Gioja,  author,  besides  statisti- 
cal and  other  writings,  of  a  voluminous  work  entitled  Nuovo 
Prospetto  delle  Scienze  Economiche  (6  vols.,  1815-17;  the 
work  was  never  completed),  intended  to  be  an  encyclopaedia 
of  all  that  had  been  taught  by  theorists,  enacted  by  Govern- 
ments, or  effected  by  populations  in  the  field  of  public  and 
private  economy.  It  is  a  learned  and  able  treatise,  but  so 
overladen  with  quotations  and  tables  as  to  repel  rather  than 
attract  readers.  Gioja  admired  the  practical  economic  system 
of  England,  and  enlarges  on  the  advantages  of  territorial  proper- 
ties, manufactures,  and  mercantile  enterprises  on  the  large  as 
opposed  to  the  small  scale.  He  defends  a  restrictive  policy, 
and  insists  on  the  necessity  of  the  action  of  the  state  as  a 
guiding,  supervising,  and  regulating  power  in  the  industrial 
world.  But  he  is  in  full  sympathy  with  the  sentiment  of  his 
age  against  ecclesiastical  domination  and  other  mediaeval 
survivals.  We  can  but  very  briefly  notice  Romagnosi  (d. 
1835),  who,  by  his  contributions  to  periodical  literature,  ami 
by  his  personal  teaching,  greatly  influenced  the  course  of 
economic  thought  in  Italy ;  Antonio  Scialoja  (Principii 
d' Economia  Sociale,  1840;  and  Carestia  e  Governo,  1853), 
an  able  advocate  of  free  trade  (d.  1877);  Luigi  Cibrario,  well 
known  as  the  author  of  Economia  Politico,  del  media  evo 
(1839;  5th  ed.,  7861:  French  trans,  by  Barneaud,  1859), 
which  is  in  fact  a  view  of  the  whole  social  system  of  that 
period;  Girolamo  Boccardo  (b.  1829;  Trattato  Teorico-pratico 
di  Economia  Politica,  1853);  the  brilliant  controversialist 
Francesco  Ferrara,  professor  at  Turin  from  1849  to  1858  (in 
whose  school  most  of  the  present  Italian  teachers  of  the  science 
were,  directly  or  indirectly,  educated),  a  partisan  of  the  laisser 
faire  doctrine  in  its  most  extreme  form,  and  an  advocate  of 


184  POLITICAL  ECONOMV. 

the  peculiar  opinions  of  Carey  and  Bastiat  on  the  subject  of 
rent;  and,,  lastly,  the  Neapolitan  minister  Ludovico  Bianchini 
(Prindpii  della  Scienza  del  Ben  Vivere  Sociale,  1845  ai'd  1855), 
who  is  remarkable  as  having  followed  in  some  degree  an 
historical  direction,  and  asserted  the  principle  of  relativity, 
and  who  also  dwelt  on  the  relations  of  economics  with  morals, 
by  a  due  attention  to  which  the  Italian  economists  have, 
indeed,  in  general  been  honourably  distinguished. 

SPAIN. 

The  Wealth  of  Nations  was  translated  into  Spanish  by 
Ortiz  in  1794.  It  may  perhaps  have  influenced  Caspar  de 
Jovellanos,  who  in  1795  presented  to  the  council  of  Castile 
and  printed  in  the  same  year  his  celebrated  Informe  de  la 
Sociedad  Economica  de  Madrid  en  expedients  de  Ley  Agraria, 
which  was  a  powerful  plea  for  reform,  especially  in  taxation 
and  the  laws  affecting  agriculture,  including  those  relating  to 
the  systems  of  entail  and  mortmain.  An  English  version  of 
this  memoir  is  given  in  the  translation  (1809)  of  Laborde's 
Spain,  voL  iv. 

GERMANY. 

Roscher  observes  that  Smith  did  not  at  first  produce  much 
impression  in  Germany.1  He  does  not  appear  to  have  been 
known  to  Frederick  the  Great ;  he  certainly  exercised  no  in- 
fluence on  him.  Nor  did  Joseph  II.  take  notice  of  his  work. 
And  of  the  minor  German  princes,  Karl  Friedrich  of  Baden, 
as  a  physiocrat,  would  not  be  accessible  to  his  doctrines.  It 
was  otherwise  in  the  generation  whose  principal  activity  be- 
longs to  the  first  decade  of  the  igth  century.  The  Prussian 
statesmen  who  were  grouped  round  Stein  had  been  formed  aa 

1  The  first  German  version  of  the  Wealth  of  Nations  was  that  by  Johann 
Friedrich  Schiller,  published  1776-78.  The  second,  which  is  the  first 
good  one,  was  by  Christian  Garve  (1794,  and  again  1799  and  1810).  A 
bter  one  by  C.  W.  Asher  (1861)  is  highly  commended. 


SYSTEM  OF  NATURAL  LIBERTY.  185 

economists  by  Smith,  as  had  also  Gentz,  intellectually  the 
most  important  man  of  the  Metternich  regime  in  Austria. 

The  first  German  expositors  of  Smith  who  did  more  than 
merely  reproduce  his  opinions  were  Christian  Jacob  Kraus 
(1753-1807),  Georg  Sartorius  (1766-1828),  and  August  Ferdi- 
nand Luder(i  7  60-1 8 1 9).  They  contributed  independent  views 

^^^•^^^^ "^ 

from  different  standpoints, — the  first  from  that  of  the  effect 
of  Smith's  doctrine  on  practical  government,  the  second  from 
that  of  its  bearing  on  history,  the  third  from  that  of  its  rela- 
tion to  statistics.  Somewhat  later  came  Gottlieb  Hufeland 
(i76o-i8i^)7^°hann  Friedrich  Eusebius  Lotz  (1771-1838,) 
and  Ludwig  Heinrich  von  Jakob  (1759-1827),  who,  whilst 
essentially  of  the  school  of  Smith,  apply  themselves  to  a  re- 
vision of  the  fundamental  conceptions  of  the  science.  These 
authors  did  not  exert  anything  like  the  wide  influence  of 
Say,  partly  on  account  of  the  less  attractive  form  of  their 
writings,  but  chiefly  because  Germany  had  not  then,  like 
France,  a  European  audience.  Julius  von  Soden  (1754-1831) 
is  largely  founded  on  Smith,  whom,  however,  he  criticises 
with  undue  severity,  especially  in  regard  to  his  form  and 
arrangement ;  the  Wealth  of  Nations  he  describes  as  a  series 
of  precious  fragments,  and  censures  Smith  for  the  absence  of 
a  comprehensive  view  of  his  whole  subject,  and  also  as  one- 
sidedly  English  in  his  tendencies. 

The  highest  form  of  the  Smithian  doctrine  in  Germany 
is  represented  by  four  distinguished  names : — Karl  Heinrich 
Eau (1792-1870),  Friedrich  Nebenius  (1784-1857),  Friedrich 
Benedict  Wilhelm  Hermann  (1795-1868),  and  Johann  Hein- 
rich von  Thiinen  (1783-1850). 

Raja's  characteristic  is  "  erudite  thoroughness."  His  Lehr- 
buck  (1826-32)  is  an  encyclopaedia  of  all  that  up  to  his  time 
had  appeared  in  Germany  under  the  several  heads  of  Volks- 
wirthschaftslehre,  Volkswirllischaftspolitik,  and  Finanzioissen- 
schaft.  His  book  is  rich  in  statistical  observations,  and  is 
particularly  instructive  on  the  economic  effects  of  different 
geographical  conditions.  It  is  well  adapted  for  the  teaching 


186  POLITICAL  ECONOMY. 

of  public  servants  whose  duties  are  connected  with  economics, 
and  it  has  in  fact  been  the  source  from  which  the  German 
official  world  down  to  the  present  time  has  derived  its  know- 
ledge of  the  science.  In  his  earlier  period  Eau  had  insisted  on 
the  necessity  of  a  reform  of  economic  doctrine  (An&ichten  der 
Volksmrthschaft,  1821),  and  had  tended  towards  relativity 
and  the  historical  method;  but  he  afterwards  conceived  the 
mistaken  notion  that  that  method  "  only  looked  into  the  past 
without  studying  the  means  of  improving  the  present,"  and 
became  himself  purely  practical  in  the  narrower  sense  of  that 
word.  He  has  the  merit  of  having  given  a  separate  treat- 
ment of  Unternehmergewinn,  or  "  wages  of  management."  The 
Prussian  minister  Nebenius,  who  was  largely  instrumental 
in  the  foundation  of  the  Zollverein,  was  author  of  a  highly 
esteemed  monograph  on  public  credit  (1820).  The  Staats- 
loirthschaftliche  Untersuclmngen  (1832 ;  2d  ed.,  1870)  of 
Hermann  do  not  form  a  regular  system,  but  treat  a  series  of 
important  special  subjects.  His  rare  technological  knowledge 
gave  him  a  great  advantage  in  dealing  with  some  economic 
questions.  He  reviewed  the  principal  fundamental  ideas  of 
the  science  with  great  thoroughness  and  acuteness.  "  His 
strength,"  says  Koscher,  "  lies  in  his  clear,  sharp,  exhaustive 
distinction  between  the  several  elements  of  a  complex  con- 
ception, or  the  several  steps  comprehended  in  a  complex  act." 
For  keen  analytical  power  his  German  brethren  compare  him 
with  Ricardo.  But  he  avoids  several  one  sided  views  of 
the  English  economist.  Thus  he  places  public  spirit  beside 
egoism  as  an  economic  motor,  regards  price  as  not  measured 
by  labour  only  but  as  a  product  of  several  factors,  and  habi- 
tually contemplates  the  consumption  of  the  labourer,  not  as 
a  part  of  the  cost  of  production  to  the  capitalist,  but  as  the 
main  practical  end  of  economics.  Von  Thiinen  is  known 
principally  by  his  remarkable  work  entitled  Der  Isolirte  Stoat 
in  Beziehung  auf  Landwirthschaft  und  Nationalokonomie 
(1826;  2d  ed.,  1842).  In  this  treatise,  which  is  a  classic  in 
the  political  economy  of  agriculture,  there  is  a  rare  union  of 


SYSTEM  OF  NATURAL  LIBERTY.  18? 

exact  observation  with  creative  imagination.  With  a  view  to 
exhibit  the  natural  development  of  agriculture,  he  imagines 
a  state,  isolated  from  the  rest  of  the  world,  circular  in  form 
and  of  uniform  fertility,  without  navigable  rivers  or  canals,  with 
a  single  large  city  at  its  centre,  which  supplies  it  with  manu- 
factures and  receives  in  exchange  for  them  its  food-products, 
and  proceeds  to  study  the  effect  of  distance  from  this  central 
market  on  the  agricultural  economy  of  the  several  concentric 
spaces  which  compose  the  territory.  The  method,  it  will 
be  seen,  is  highly  abstract,  but,  though  it  may  not  be  fruit- 
ful, it  is  quite  legitimate.  The  author  is  under  no  illusion 
blinding  him  to  the  unreality  of  the  hypothetic  case.  The 
supposition  is  necessary,  in  his  view^  in  order  to  separate 
and  consider  apart  one  essential  condition — that,  namely,  of 
situation  with  respect  to  the  market.  It  was  his  intention 
(imperfectly  realised,  however)  to  institute  afterwards  several 
different  hypotheses  in  relation  to  his  isolated  state,  for  the 
purpose  of  similarly  studying  other  conditions  which  in  real 
life  are  found  in  combination  or  conflict.  The  objection  to 
this  method  lies  in  the  difficulty  of  the  return  from  the 
abstract  study  to  the  actual  facts;  and  this  is  probably  an 
insuperable  one  in  regard  to  most  of  its  applications.  The 
investigation,  however,  leads  to  trustworthy  conclusions  as 
to  the  conditions  of  the  succession  of  different  systems  of  land 
economy.  The  book  abounds  in  calculations  relating  to  agri- 
cultural expenditure  and  income,  which  diminish  its  interest 
to  the  general  reader,  though  they  are  considered  valuable  to 
the  specialist.  They  embody  the  results  of  the  practical  ex- 
perience of  the  author  on  his  estate  of  Tellow  in  Mecklenburg- 
Schwerin.  Von  Thiinen  was  strongly  impressed  with  the 
danger  of  a  violent  conflict  between  the  middle  class  and  the 
proletariate,  and  studied  earnestly  the  question  of  wages, 
which  he  was  one  of  the  first  to  regard  habitually,  not  merely 
as  the  price  of  the  commodity  labour,  but  as  the  means  of 
subsistence  of  the  mass  of  the  community.  He  arrived  by 
mathematical  reasonings  of  some  complexity  at  a  formula 


188  POLITICAL  ECONOMY. 

which  expresses  the  amount  of  "  natural  wages "  as  = 
where  a  is  the  necessary  expenditure  of  the  labourer  for 
subsistence,  and  p  is  the  product  of  his  labour.  To  this 
formula  he  attributed  so  much  importance  that  he  directed  it 
to  be  engraved  on  his  tomb.  It  implies  that  wages  ought  to 
rise  with  the  amount  of  the  product ;  and  this  conclusion 
led  him  to  establish  on  his  estate  a  system  of  participation  by 
the  labourers  in  the  profits  of  farming,  of  which  some  account 
will  be  found  in  Mr.  Sedley  Taylor's  Profit-sharing  between 
Capital  and  Labour  (1884).  Yon  Thiinen  deserves  more 
attention  than  he  has  received  in  England ;  both  as  a  man 
and  as  a  writer  he  was  eminently  interesting  and  original ;  and 
there  is  much  in  Der  Isolirte  Stoat  and  his  other  works  that 
is  awakening  and  suggestive. 

Roscher  recognises  what  he  calls  a  Germano-Russian 
(deutsch-russische)  school  of  political  economy,  represented 
principally  by  Heinrich  Storch  (1766-1825).  Mercantilist 
principles  had  been  preached  by  a  native  ("  autochthonen  ") 
economist,  Ivan  Possoschkoff,  in  the  time  of  Peter  the  Great. 
The  new  ideas  of  the  Smithian  system  were  introduced  into 
Russia  by  Christian  Von  Schlb'zer  (1774—1831)  in  his  pro- 
fessorial lectures  and  in  his  Anfangsgriinde  der  Staatswirth- 
schaft,  oder  die  Lehre  von  National-reichthume  (1805—1807). 
Storch  was  instructor  in  economic  science  of  the  future 
emperor  Nicholas  and  his  brother  the  grand-duke  Michael, 
and  the  substance  of  his  lessons  to  them  is  contained  in  his 
Cours  d'JZconomie  Politique  (1815).  The  translation  of  this 
treatise  into  Russian  was  prevented  by  the  censorship  ;  Rau 
published  a  German  version  of  it,  with  annotations,  in  1819. 
It  is  a  work  of  a  very  high  order  of  merit.  The  epithet 
"  deutsch-russisch "  seems  little  applicable  to  Storch ;  as 
Roscher  himself  says,  he  follows  mainly  English  and  French 
writers — Say,  Sismondi,  Turgot,  Bentham,  Steuart,  and  Hume, 
but,  above  all,  Adam  Smith.  His  personal  position  (and  the 
same  is  true  of  Schlozer)  led  him  to  consider  economic 
doctrines  in  connection  with  a  stage  of  culture  different  from 


SYSTEM  OF  NATURAL  LIBERTY.  189 

that  of  the  Western  populations  amongst  which  they  had 
been  formulated  ;  this  change  of  the  point  of  view  opened  the 
door  to  relativity,  and  helped  to  prepare  the  Historical  method. 
Storch's  study  of  the  economic  and  moral  effects  of  serfdom 
is  regarded  as  especially  valuable.  The  general  subjects  with 
which  he  has  particularly  connected  his  name  are  (i)  the 
doctrine  of  immaterial  commodities  (or  elements  of  national 
prosperity),  such  as  health,  talent,  morality,  and  the  like ; 
(2)  the  question  of  "productive"  and  "unproductive,"  as 
characters  of  labour  and  of  consumption,  on  which  he  dis- 
agreed with  Smith  and  may  have  furnished  indications  to 
Dunoyer;  and  (3)  the  differences  between  the  revenue  of 
nations  and  that  of  individuals,  on  which  he  follows  Lauder- 
dale  and  is  opposed  to  Say.  The  latter  economist  having 
published  at  Paris  (1823)  a  new  edition  of  Storch's  Cours, 
with  criticisms  sometimes  offensive  in  tone,  he  published  by 
way  of  reply  to  some  of  Say's  strictures  what  is  considered 
his  ripest  and  scientifically  most  important  work,  Considera- 
tions sur  la  nature  du  Revenu  National  (1824  ;  translated  into 
German  by  the  author  himself,  1825). 

A  distinct  note  of  opposition  to  the  Smithian  economics  was 
sounded  in  Germany  by  two  writers,  who,  setting  out  from 
somewhat  different  points  of  view,  animated  by  different 
sentiments,  and  favouring  different  practical  systems,  yet,  so 
far  as  their  criticisms  are  concerned,  arrive  at  similar  con- 
clusions ;  we  mean  Adam  Muller  and  Friedrich  List. 

Adam  Muller  (1779-1829)  was  undoubtedly  a  man  of  real 
genius.  In  his  principal  work  Elemente  der  Staatskunst 
(1809),  and  his  other  writings,  he  represents  a  movement  of 
economic  thought  which  was  in  relation  with  the  (so-called) 
Eomantic  literature  of  the  period.  The  reaction  against 
Smithianism  of  which  he  was  the  coryphaeus  was  founded 
on  an  attachment  to  the  principles  and  social  system  of  the 
Middle  Ages.  It  is  possible  that  the  political  and  historical 
ideas  which  inspire  him,  his  repugnance  to  contemporary 
liberalism,  and  his  notions  of  regular  organic  development, 


igo  POLITICAL  ECONOMY. 

especially  in  relation  to  England,  were  in  some  degree  imbibed 
from  Edmund  Burke,  whose  Reflections  on  the  Revolution  in 
France  had  been  translated  into  German  by  Friedrich  Gentz, 
the  friend  and  teacher  of  Miiller.  The  association  of  his 
criticisms  with  mediaeval  prepossessions  ought  not  to  prevent 
our  recognising  the  elements  of  truth  which  they  contain. 

He  protests  against  the  doctrine  of  Smith  and  against 
modern  political  economy  in  general  on  the  ground  that  it 
presents  a  mechanical,  atomistic,  and  purely  material  con- 
ception of  society,  that  it  reduces  to  nullity  all  moral  forces 
and  ignores  the  necessity  of  a  moral  order,  that  it  is  at  bottom 
no  more  than  a  theory  of  private  property  and  private  interests, 
and  takes  no  account  of  the  life  of  the  people  as  a  whole  in 
its  national  solidarity  and  historical  continuity.  Exclusive 
attention,  he  complains,  is  devoted  to  the  immediate  production 
of  objects  possessing  exchange  value  and  to  the  transitory 
existence  of  individuals ;  whilst  to  the  maintenance  of  the 
collective  production  for  future  generations,  to  intellectual 
products,  powers,  possessions,  and  enjoyments,  and  to  the 
State  with  its  higher  tasks  and  aims,  scarcely  a  thought  is 
given.  The  truth  is  that  nations  are  specialised  organisms 
with  distinct  principles  of  life,  having  definite  individualities 
which  determine  the  course  of  their  historical  development. 
Each  is  through  all  time  one  whole ;  and,  as  the  present  is 
the  heir  of  the  past,  it  ought  to  keep  before  it  constantly  the 
permanent  good  of  the  community  in  the  future.  The  eco- 
nomic existence  of  a  people  is  only  one  side  or  province  of 
its  entire  activity,  requiring  to  be  kept  in  harmony  with  the 
higher  ends  of  society  ;  and  the  proper  organ  to  effect  this 
reconciliation  is  the  State,  which,  instead  of  being  merely  an 
apparatus  for  the  administration  of  justice,  represents  the 
totality  of  the  national  life.  The  division  of  labour,  Miiller 
holds,  is  imperfectly  developed  by  Smith,  who  makes  it  to 
arise  out  of  a  native  bent  for  truck  or  barter  ;  whilst  its 
dependence  on  capital — on  the  labours  and  accumulations  of 
past  generations — is  not  duly  emphasised,  nor  is  the  necessary 


SYSTEM  OF  NATURAL  LIBERTY.  191 

counterpoise  and  completion  of  the  division  of  labour,  in 
the  principle  of  the  national  combination  of  labour,  properly 
brought  out.  Smith  recognises  only  material,  not  spiritual, 
capital ;  yet  the  latter,  represented  in  every  nation  by  language, 
as  the  former  by  money,  is  a  real  national  store  of  experience, 
wisdom,  good  sense,  and  moral  feeling,  transmitted  with  in- 
crease by  each  generation  to  its  successor,  and  enables  each 
generation  to  produce  immensely  more  than  by  its  own  unaided 
powers  it  could  possibly  do.  Again,  the  system  of  Smith 
is  one-sidedly  British  ;  if  it  is  innocuous  on  the  soil  of 
England,  it  is  because  in  her  society  the  old  foundations  on 
which  the  spiritual  and  material  life  of  the  people  can  securely 
rest  are  preserved  in  the  surviving  spirit  of  feudalism  and  the 
inner  connection  of  the  whole  social  system — the  national 
capital  of  laws,  manners,  reputation,  and  credit,  which  has 
been  handed  down  in  its  integrity  in  consequence  of  the  in- 
sular position  of  the  country.  .  For  the  continent  of  Europe 
a  quite  different  system  is  necessary,  in  which,  in  place  of  the 
sum  of  the  private  wealth  of  individuals  being  viewed  as  the 
primary  object,  the  real  wealth  of  the  nation  and  the  produc- 
tion of  national  power  shall  be  made  to  predominate,  and  along 
with  the  division  of  labour  its  national  union  and  concentra- 
tion— along  with  the  physical,  no  less  the  intellectual  and 
moral,  capital  shall  be  embraced.  In  these  leading  traits  of 
Miiller's  thought  there  is  much  which  foreshadows  the  more 
recent  forms  of  German  economic  and  sociological  speculation, 
especially  those  characteristic  of  the  "  Historical "  school. 

Another  element  of  opposition  was  represented  by  Friedrich 
List  (1798-1846),  a  man  of  great  intellectual  vigour  as  well 
as  practical  energy,  and  notable  as  having  powerfully  contri- 
buted by  his  writings  to  the  formation  of  the  German  Zull- 
verein.  His  principal  work  is  entitled  Das  Nationals  System 
der  Politischen  Oekonomie  (1841  ;  6th  ed.,  1877  :  Eng.  trans., 
1885).  Though  his  practical  conclusions  were  different  from 
Miiller's,  he  was  largely  influenced  by  the  general  mode  of 
thinking  of  that  writer,  and  by  his  strictures  on  the  doctrine 


192  POLITICAL  ECONOMY. 

of  Smith.  It  was  particularly  against  the  cosmopolitan  prin- 
ciple in  the  modern  economical  system  that  he  protested,  and 
against  the  absolute  doctrine  of  free  trade,  which  was  in 
harmony  with  that  principle.  He  gave  prominence  to  the 
National  idea,  and  insisted  on  the  special  requirements  of 
each  nation  according  to  its  circumstances  and  especially  to 
the  degree  of  its  development. 

He  refuses  to  Smith's  system  the  title  of  the  industrial, 
which  he  thinks  more  appropriate  to  the  mercantile  system, 
and  designates  the  former  as  "  the  exchange- value  system." 
He  denies  the  parallelism  asserted  by  Smith  between  the  eco- 
nomic conduct  proper  to  an  individual  and  to  a  nation,  and 
holds  that  the  immediate  private  interest  of  the  separate 
members  of  the  community  will  not  lead  to  the  highest  good 
of  the  whole.  The  nation  is  an  existence,  standing  between 
the  individual  and  Humanity,  and  formed  into  a  unity  by  its 
language,  manners,  historical  development,  culture,  and  con* 
stitution.  This  unity  is  the  first  condition  of  the  security, 
wellbeing,  progress,  and  civilisation  of  the  individual ;  and 
private  economic  interests,  like  all  others,  must  be  subordi- 
nated to  the  maintenance,  completion,  and  strengthening  of 
the  nationality.  The  nation  having  a  continuous  life,  its  true 
wealth  consists — and  this  is  List's  fundamental  doctrine — not 
in  the  quantity  of  exchange- values  which  it  possesses,  but  in 
the  full  and  many-sided  development  of  its  productive  powers. 
Its  economic  education,  if  we  may  so  speak,  is  more  important 
than  the  immediate  production  of  values,  and  it  may  be  right 
that  the  present  generation  should  sacrifice  its  gain  and  enjoy- 
ment to  secure  the  strength  and  skill  of  the  future.  In  the 
sound  and  normal  condition  of  a  nation  which  has  attained 
economic  maturity,  the  three  productive  powers  of  agriculture, 
manufactures,  and  commerce  should  be  alike  developed.  But 
the  two  latter  factors  are  superior  in  importance,  as  exercising 
a  more  effective  and  fruitful  influence  on  the  whole  culture 
of  the  nation,  as  well  as  on  its  independence.  Navigation, 
railways,  all  higher  technical  arts,  connect  themselves  specially 


SYSTEM  OF  NATURAL  LIBERTY.  193 

irith  these  factors ;  whilst  in  a  purely  agricultural  state  there 
is  a  tendency  to  stagnation,  absence  of  enterprise,  and  the  main- 
tenance of  antiquated  prejudices.  But  for  the  growth  of  the 
higher  forms  of  industry  all  countries  are  not  adapted — only 
those' of  the  temperate  zones,  whilst  the  torrid  regions  have 
a  natural  monopoly  in  the  production  of  certain  raw  materials ; 
end  thus  between  these  two  groups  of  countries  a  division  of 
labour  and  confederation  of  powers  spontaneously  takes  place. 
List  then  goes  on  to  explain  his  theory  of  the  stages  of  econo- 
mic development  through  which  the  nations  of  the  temperate 
zone,  which  are  furnished  with  all  the  necessary  conditions, 
naturally  pass,  in  advancing  to  their  normal  economic  state. 
These  are  (i)  pastoral  life,  (2)  agriculture,  (3)  agriculture 
united  with  manufactures;  whilst  in  the  final  stage  agriculture, 
manufactures,  and  commerce  are  combined.  The  economic 
task  of  the  state  is  to  bring  into  existence  by  legislative  and 
administrative  action  the  conditions  required  for  the  progress 
of  the  nation  through  these  stages.  Out  of  this  view  arises 
List's  scheme  of  industrial  politics.  Every  nation,  according 
to  him,  should  begin  with  free  trade,  stimulating  and  improv- 
ing its  agriculture  by  intercourse  with  richer  and  more  culti- 
vated nations,  importing  foreign  manufactures  and  exporting 
raw  products.  When  it  is  economically  so  far  advanced  that 
it  can  manufacture  for  itself,  then  a  system  of  protection 
should  be  employed  to  allow  the  home  industries  to  develop 
themselves  fully,  and  save  them  from  being  overpowered  in 
their  earlier  efforts  by  the  competition  of  more  matured  foreign 
industries  in  the  home  market.  When  the  national  industriea 
have  grown  strong  enough  no  longer  to  dread  this  competi- 
tion, then  the  highest  stage  of  progress  has  been  reached  ;  free 
bade  should  again  become  the  rule,  and  the  nation  be  thus 
thoroughly  incorporated  with  the  universal  industrial  union. 
In  List's  time,  according  to  his  view,  Spain,  Portugal,  and 
Naples  were  purely  agricultural  countries;  Germany  and  the 
United  States  of  North  America  had  arrived  at  the  second 
»tage,  their  manufactures  being  in  process  of  development- 

M 


194  POLITICAL  ECONOMY. 

France  was  near  the  boundary  of  the  third  or  highest  stage, 
which  England  alone  had  reached.  For  England,  therefore, 
as  well  as  for  the  agricultural  countries  first-named,  free  trade 
was  the  right  economic  policy,  but  not  for  Germany  or  America. 
What  a  nation  loses  for  a  time  in  exchange-values  during  the 
protective  period  she  much  more  than  gains  in  the  long  run 
in  productive  power, — the  temporary  expenditure  being  strictly 
analogous,  when  we  place  ourselves  at  the  point  of  view  of 
the  life  of  the  nation,  to  the  cost  of  the  industrial  education 
of  the  individual.  The  practical  conclusion  which  List  drew 
for  his  own  country  was  that  she  needed  for  her  economic  pro- 
gress an  extended  and  conveniently  bounded  territory  reaching 
to  the  sea-coast  both  on  north  and  south,  and  a  vigorous  ex- 
pansion of  manufactures  and  commerce,  and  that  the  way  to 
the  latter  lay  through  judicious  protective  legislation  with  a 
customs  union  comprising  all  German  lands,  and  a  German 
marine  with  a  Navigation  Act.  The  national  German  spirit, 
striving  after  independence  and  power  through  union,  and  the 
national  industry,  awaking  from  its  lethargy  and  eager  to 
recover  lost  ground,  were  favourable  to  the  success  of  List's 
book,  and  it  produced  a  great  sensation.  He  ably  represented 
the  tendencies  and  demands  of  his  time  in  his  own  country ; 
his  work  had  the  effect  of  fixing  the  attention,  not  merely  of 
the  speculative  and  official  classes,  but  of  practical  men  gene- 
rally, on  questions  of  Political  Economy  ;  and  he  had  without 
doubt  an  important  influence  on  German  industrial  policy. 
So  far  as  science  is  concerned,  the  emphasis  he  laid  on  the 
relative  historical  study  of  stages  of  civilisation  as  affecting 
economic  questions,  and  his  protest  against  absolute  formulas, 
had  a  certain  value ;  and  the  preponderance  given  to  the 
national  development  over  the  immediate  gains  of  individuals 
was  sound  in  principle ;  though  his  doctrine  was,  both  on  its 
public  and  private  sides,  too  much  of  a  mere  chrematistic, 
and  tended  in  fact  to  set  up  a  new  form  of  mercantilism, 
rather  than  to  aid  the  contemporary  effort  towards  social 
reform. 


SYSTEM  OF  NATURAL  LIBERTY.  195 

Most  of  the  writers  at  home  or  abroad  hitherto  mentioned 
continued  the  traditions  of  the  school  of  Smith,  only  develop- 
ing his  doctrine  in  particular  directions,  sometimes  not  without 
one-sidedness  or  exaggeration,  or  correcting  minor  °rrors  into 
which  he  had  fallen,  or  seeking  to  give  to  tne  exposition  of 
his  principles  more  of  order  and  lucidity.  Some  assailed  the 
abuse  of  abstraction  by  Smith's  successors,  objected  to  the  con- 
clusions of  Kicardo  and  his  followers  their  non-accordance  with 
the  actual  facts  of  human  life,  or  protested  against  the  anti- 
social consequences  which  seemed  to  result  from  the  application 
of  the  (so-called)  orthodox  formulas.  A  few  challenged  Smith's 
fundamental  ideas,  and  insisted  on  the  necessity  of  altering  the 
basis  of  general  philosophy  on  which  his  economics  ultimately 
rest.  But,  notwithstanding  various  premonitory  indications, 
nothing  substantial,  at  least  nothing  effective,  was  done,  within 
the  field  we  have  as  yet  surveyed,  towards  the  establishment 
of  a  really  new  order  of  thinking,  or  new  mode  of  proceeding, 
in  this  branch  of  inquiry.  Now,  however,  we  have  to  describe 
a  great  and  growing  movement,  which  has  already  considerably 
changed  the  whole  character  of  the  study  in  the  conceptions 
of  many,  and  which  promises  to  exercise  a  still  more  potent 
influence  in  the  future.  We  mean  the  rise  of  the  Historical 
School,  which  we  regard  as  marking  the  third  epoch  in  the 
modern  development  of  economic  science. 


CHAPTER  VI. 
THE  HISTORICAL  SCHOOL. 

THE  negative  movement  which  filled  the  eighteenth  century 
had  for  its  watchword  on  the  economic  side  the  liberation  of 
industrial  effort  from  both  feudal  survivals  and  Governmental 
fetters.  But  in  all  the  aspects  of  that  movement,  the  economic 
as  well  as  the  rest,  the  process  of  demolition  was  historically 
only  the  necessary  preliminary  condition  of  a  total  renova- 
tion, towards  which  Western  Europe  was  energetically  tending, 
though  with  but  an  indistinct  conception  of  its  precise  nature. 
The  disorganisation  of  the  body  of  opinion  which  underlay  the 
old  system  outran  the  progress  towards  the  establishment  of 
new  principles  adequate  to  form  a  guidance  in  the  future.  The 
critical  philosophy  which  had  wrought  the  disorganisation 
could  only  repeat  its  formulas  of  absolute  liberty,  but  was 
powerless  for  reconstruction.  And  hence  there  was  seen 
throughout  the  West,  after  the  French  explosion,  the  remark- 
able spectacle  of  a  continuous  oscillation  between  the  tendency 
to  recur  to  outworn  ideas  and  a  vague  impulse  towards  a  new 
order  in  social  thought  and  life,  this  impulse  often  taking  an 
anarchical  character. 

From  this  state  of  oscillation,  which  has  given  to  our 
century  its  equivocal  and  transitional  aspect,  the  only  possible 
issue  was  in  the  foundation  of  a  scientific  social  doctrine  which 
should  supply  a  basis  for  the  gradual  convergence  of  opinion 
on  human  questions.  The  foundation  of  such  a  doctrine  is  the 
immortal  service  for  which  the  world  is  indebted  to  Auguste 
Comte  (1798-1857). 


THE  HISTORICAL  SCHOOL.  197 

The  leading  features  of  Sociology,  as  he  conceived  it,  are 
the  following: — (i)  it  is  essentially  one  science,  in  which  all 
the  elements  of  a  social  state  are  studied  in  their  relations  and 
mutual  actions ;  (2)  it  includes  a  dynamical  as  well  as  a  statical 
theory  of  society ;  (3)  it  thus  eliminates  the  absolute,  substi- 
tuting for  an  imagined  fixity  the  conception  of  ordered  change  ; 
(4)  its  principal  method,  though  others  are  not  excluded,  is 
that  of  historical  comparison ;  (5)  it  is  pervaded  by  moral 
ideas,  by  notions  of  social  duty,  as  opposed  to  the  individual 
rights  which  were  derived  as  corollaries  from  the  jus  natures  ; 
and  (6)  in  its  spirit  and  practical  consequences  it  tends  to  the 
realisation  of  all  the  great  ends  which  compose  "  the  popular 
cause " ;  yet  (7)  it  aims  at  this  through  peaceful  means,  re- 
placing revolution  by  evolution.1  The  several  characteristics 
we  have  enumerated  are  not  independent ;  they  may  be  shown 
to  be  vitally  connected  with  each  other.  Several  of  these 
features  must  now  be  more  fully  described;  the  others  will 
meet  us  before  the  close  of  the  present  survey. 

In  the  masterly  exposition  of  sociological  method  which  is 
contained  in  the  fourth  volume  of  the  Philosophic  Positive 
(i839),2  Comte  marks  out  the  broad  division  between  social 
statics  and  social  dynamics — the  former  studying  the  laws  of 
social  coexistence,  the  latter  those  of  social  development.  The 
fundamental  principle  of  the  former  is  the  general  consensus 

1  It  would  be  a  grave  error  to  suppose  that  the  subjection  of  social 
phenomena  to  natural  laws  affords  any  encouragement  to  a  spirit  of  fatal- 
istic quietism.     On  the  contrary,  it  is  the  existence  of  such  laws  that  is 
the  necessary  basis  of  all  systematic  action  for  the  improvement  either 
of  our  condition  or  of  our  nature,  as  may  be  seen  by  considering  the 
parallel  case  of  hygienic  and  therapeutic  agencies.     And,  since  the  dif- 
ferent orders  of  phenomena  are  more  modifiable  in  proportion  to  their 
greater  complexity,  the  social  field  admits  of  more  extensive  and  effica- 
cious human  intervention  than  the  inorganic  or  vital  domain.     In  rela- 
tion to  the  dynamical  side  of  Sociology,  whilst  the  direction  and  essential 
character  of  the  evolution  are  predetermined,  its  rate  and  secondary 
features  are  capable  of  modification. 

2  He  had  already  in   1822  stated  his  fundamental  principles  in  an 
opuscule  which  is  reproduced  in  the  Appendix  to  his  Politiqut  Positive. 


198  POLITICAL  ECONOMY. 

between  the  several  social  organs  and  functions,  which,  without 
unduly  pressing  a  useful  analogy,  we  may  regard  as  resembling 
that  which  exists  between  the  several  organs  and  functions  of 
an  animal  body.  The  study  of  dynamical  is  different  from, 
and  necessarily  subordinated  to,  that  of  statical  sociology,  pro- 
gress being  in  fact  the  development  of  order,  just  as  the  study 
of  evolution  in  biology  is  different  from,  and  subordinated  to, 
that  of  the  structures  and  functions  which  are  exhibited  by 
evolution  as  they  exist  at  the  several  points  of  an  ascending 
scale.  The  laws  of  social  coexistence  and  movement  are  as 
much  subjects  for  observation  as  the  corresponding  phenomena 
in  the  life  of  an  individual  organism.  For  the  study  of 
development  in  particular,  a  modification  of  the  comparative 
method  familiar  to  biologists  will  be  the  appropriate  mode  of 
research.  The  several  successive  stages  of  society  will  have 
to  be  systematically  compared,  in  order  to  discover  their  laws 
of  sequence,  and  to  determine  the  filiation  of  their  charac- 
teristic features. 

Though  we  must  take  care  that  both  in  our  statical  and 
dynamical  studies  we  do  not  ignore  or  contradict  the  funda- 
mental properties  of  human  nature,  the  project  of  deducing 
either  species  of  laws  fr<3m  those  properties  independently 
of  direct  observation  is  one  which  cannot  be  realised. 
Neither  the  general  structure  of  human  society  nor  the 
march  of  its  development  could  be  so  predicted.  This  is 
especially  evident  with  respect  to  dynamical  laws,  because,  in 
the  passage  of  society  from  one  phase  to  another,  the  pre- 
ponderating agency  is  the  accumulated  influence  of  past 
generations,  which  is  much  too  complex  to  be  investigated 
deductively — a  conclusion  which  it  is  important  to  keep 
steadily  before  us  now  that  some  of  the  (so-called)  anthro- 
pologists are  seeking  to  make  the  science  of  society  a  mere 
annex  and  derivative  of  biology.  The  principles  of  biology 
unquestionably  lie  at  the  foundation  of  the  social  science,  but 
the  latter  has,  and  must  always  have,  a  field  of  research  and 
a  method  of  inquiry  peculiar  to  itself.  The  field  is  history  in 


THE  HISTORICAL  SCHOOL.  199 

the  largest  sense,  including  contemporary  fact ;  and  the  prin- 
cipal, though  not  exclusive,  method  is,  as  we  have  said,  that 
process  of  sociological  comparison  which  is  most  conveniently 
called  "the  historical  method." 

These  general  principles  affect  the  economic  no  less  than 
other  branches  of  social  speculation ;  and  with  respect  to  that 
department  of  inquiry  they  lead  to  important  results.  They 
show  that  the  idea  of  forming  a  true  theory  of  the  economic 
frame  and  working  of  society  apart  from  its  other  sides  is 
illusory.  Such  study  is  indeed  provisionally  indispensable, 
but  no  rational  theory  of  the  economic  organs  and  functions 
of  society  can  be  constructed  if  they  are  considered  as  isolated 
from  the  rest.  In  other  words,  a  separate  economic  science 
is,  strictly  speaking,  an  impossibility,  as  representing  only 
one  portion  of  a  complex  organism,  all  whose  parts  and  their 
actions  are  in  a  constant  relation  of  correspondence  and 
reciprocal  modification.  Hence,  too,  it  will  follow  that, 
whatever  useful  indications  may  be  derived  from  our  general 
knowledge  of  individual  human  nature,  the  economic  structure 
of  society  and  its  mode  of  development  cannot  be  deductively 
foreseen,  but  must  be  ascertained  by  direct  historical  investi- 
gation. We  have  said  "  its  mode  of  development " ;  for  it  is 
obvious  that,  as  of  every  social  element,  so  of  the  economic 
factor  in  human  affairs,  there  must  be  a  dynamical  doctrine, 
a  theory  of  the  successive  phases  of  the  economic  condition  ol 
society ;  yet  in  the  accepted  systems  this  was  a  desideratum, 
nothing  but  some  partial  and  fragmentary  notions  on  this 
whole  side  of  the  subject  being  yet  extant.1  And,  further, 
the  economic  structure  and  working  of  one  historic  stage 
being  different  from  those  of  another,  we  must  abandon  the 
idea  of  an  absolute  system  possessing  universal  validity,  and 
substitute  that  of  a  series  of  such  systems,  in  which,  however, 

1  Under  the  influence  of  these  views  of  Comte,  J.  S.  Mill  attempted 
in  Book  IV.  of  his  Political  Economy  a  treatment  of  Economic  Dynamics ; 
but  that  appears  to  us  one  of  the  least  satisfactory  portions  of  hut 
work. 


200  POLITICAL  ECONOMY. 

the  succession  is  not  at  all  arbitrary,  but  is  itself  regulated 
by  law. 

Though  Comte's  enterprise  was  a  constructive  one,  his  aim 
being  the  foundation  of  a  scientific  theory  of  society,  he  could 
not  avoid  criticising  the  labours  of  those  who  before  him  ha.l 
treated  several  branches  of  social  inquiry.  Amongst  them  the 
economists  were  necessarily  considered  ;  and  he  urged  or  im- 
plied, in  various  places  of  his  above-named  work,  as  well  as 
of  his  Politique  Positive,  objections  to  their  general  ideas  and 
methods  of  procedure  essentially  the  same  with  those  which 
we  stated  in  speaking  of  Ricardo  and  his  followers.  J.  S. 
Mill  shows  himself  much  irritated  by  these  comments,  and 
remarks  on  them  as  showing  "how  extremely  superficial  M. 
Conite  "  (whom  he  yet  regards  as  a  thinker  quite  comparable 
with  Descartes  and  Leibnitz)  "  could  sometimes  be," — an  un- 
fortunate observation,  which  he  would  scarcely  have  made 
if  he  could  have  foreseen  the  subsequent  march  of  Euro- 
pean thought,  and  the  large  degree  in  which  the  main  points 
of  Comte's  criticism  have  been  accepted  or  independently 
reproduced. 

GERMANY. 

The  second  manifestation  of  this  new  movement  in  economic 
science  was  the  appearance  of  the  German  historical  school 
The  views  of  this  school  do  not  appear  to  have  arisen,  like 
Comte's  theory  of  sociological  method,  out  of  general  philo- 
sophic ideas  ;  they  seem  rather  to  have  been  suggested  by  an 
extension  to  the  economic  field  of  the  conceptions  of  the  his- 
torical school  of  jurisprudence  of  which  Savigny  was  the  most 
eminent  representative.  The  juristic  system  is  not  a  fixed 
social  phenomenon,  but  is  variable  from  one  stage  in  the 
progress  of  society  to  another ;  it  is  in  vital  relation  with 
the  other  coexistent  social  factors ;  and  what  is,  in  the  jural 
sphere,  adapted  to  one  period  of  development,  is  often  unfit 
for  another.  These  ideas  were  seen  to  be  applicable  to  the 


THE  HISTORICAL  SCHOOL.  201 

economic  system  also;  the  relative  point  of  view  was  thus 
reached,  and  the  absolute  attitude  was  found  to  be  untenable. 
Cosmopolitanism  in  theory,  or  the  assumption  of  a  system 
equally  true  of  every  country,  and  what  has  been  called  per- 
petualism,  or  the  assumption  of  a  system  applicable  to  every 
social  stage,  were  alike  discredited.  And  so  the  German 
historical  school  appears  to  have  taken  its  rise. 

Omitting  preparatory  indications  and  undeveloped  germs 
of  doctrine,  we  must  trace  the  origin  of  the  school  to  Wilhelm 
Roscher.  Its  fundamental  principles  are  stated,  though  with 
some  hesitation,  and  with  an  unfortunate  contrast  of  the  his- 
torical with  the  "  philosophical "  method,1  in  his  Grundriss 
zu  Vorlemngen  uber  die  Staatswirthschaft  nach  geschiclitlicher 
Methods  (1843).  The  following  are  the  leading  heads  in- 
sisted on  in  the  preface  to  that  work. 

"The  historical  method  exhibits  itself  not  merely  in  the 
external  form  of  a  treatment  of  phenomena  according  to  their 
chronological  succession,  but  in  the  following  fundamental 
ideas,  (i.)  The  aim  is  to  represent  what  nations  have  thought, 
willed,  and  discovered  in  the  economic  field,  what  they  have 
striven  after  and  attained,  and  why  they  have  attained  it. 
(2.)  A  people  is  not  merely  the  mass  of  individuals  now 
living ;  it  will  not  suffice  to  observe  contemporary  facts.  (3.) 
All  the  peoples  of  whom  we  can  learn  anything  must  be 
studied  and  compared  from  the  economic  point  of  view, 
especially  the  ancient  peoples,  whose  development  lies  before 
us  in  its  totality.  (4.)  We  must  not  simply  praise  or  blame 
economic  institutions  ;  few  of  them  have  been  salutary  or 
detrimental  to  all  peoples  and  at  all  stages  of  culture ;  rather 
it  is  a  principal  task  of  science  to  show  how  and  why,  out 
of  what  was  once  reasonable  and  beneficent,  the  unwise  and 
inexpedient  has  often  gradually  arisen."  Of  the  principles 
enunciated  in  this  paraphrase  of  Reseller's  words  a  portion 

1  This  phraseology  was  probably  borrowed  from  the  controversy  on 
the  method  of  jurisprudence  between  Thibaut  on  the  one  band  and 
Suvigny  and  Hugo  on  the  other. 


202  POLITICAL  ECONOMY. 

of  the  third  alone  seems  open  to  objection ;  the  economy  ol 
ancient  peoples  is  not  a  more  important  subject  of  study  than 
that  of  the  moderns;  indeed,  the  question  of  the  relative  im- 
portance of  the  two  is  one  that  ought  not  to  be  raised.  For 
the  essential  condition  of  all  sound  sociological  inquiry  is  the 
comparative  consideration  of  the  entire  series  of  the  most 
complete  evolution  known  to  history — that,  namely,  of  the 
group  of  nations  forming  what  is  known  as  the  Occidental 
Commonwealth,  or,  more  briefly,  "the  West."  The  reasons 
for  choosing  this  social  series,  and  for  provisionally  restricting 
our  studies  almost  altogether  to  it,  have  been  stated  with 
unanswerable  force  by  Comte  in  the  Philosophic  Positive. 
Greece  and  Rome  are,  indeed,  elements  in  the  series ;  but  it 
is  the  development  as  a  whole,  not  any  special  portions  of  it, 
that  Sociology  must  keep  in  view  in  order  to  determine  the 
laws  of  the  movement, — just  as,  in  the  study  of  biological 
evolution,  no  one  stage  of  an  organism  can  be  considered  as  of 
preponderating  importance,  the  entire  succession  of  changes 
being  the  object  of  research.  Of  Roscher's  further  eminent 
services  we  shall  speak  hereafter ;  he  is  now  mentioned  only 
in  relation  to  the  origin  of  the  new  school. 

In  1848  Bruno  Hildebrand  published  the  first  volume  of  a 
work,  which,  though  he  lived  for  many  years  after  (d.  1878), 
he  never  continued,  entitled  Die  NationaloTconomie  der  Gegen- 
wart  und  Zukunft.  Hildebrand  was  a  thinker  of  a  really 
high  order;  it  may  be  doubted  whether  amongst  German 
economists  there  has  been  any  endowed  with  a  more  profound 
and  searching  intellect.  He  is  quite  free  from  the  wordiness 
and  obscurity  which  too  often  characterise  German  writers, 
and  traces  broad  outlines  with  a  sure  and  powerful  hand.  His 
book  contains  a  masterly  criticism  of  the  economic  systems 
which  preceded,  or  belonged  to,  his  time,  including  those  of 
Smith,  Miiller,  List,  and  the  socialists.  But  it  is  interesting 
to  us  at  present  mainly  from  the  general  position  he  takes  up, 
and  his  conception  of  the  real  nature  of  political  economy. 
The  object  of  his  work,  he  tells  us,  is  to  open  a  way  in  the 


THE  HISTORICAL  SCHOOL.  203 

economic  domain  to  a  thorough  historical  direction  and  method, 
and  to  transform  the  science  into  a  doctrine  of  the  laws  of  the 
economic  development  of  nations.  It  is  interesting  to  observe 
that  the  type  which  he  sets  before  him  in  his  proposed  reform 
of  political  economy  is  not  that  of  historical  jurisprudence, 
but  of  the  science  of  language  as  it  has  been  reconstructed  in 
the  present  century,  a  selection  which  indicates  the  compara- 
tive method  as  the  one  which  he  considered  appropriate.  In 
both  sciences  we  have  the  presence  of  an  ordered  variation  in 
time,  and  the  consequent  substitution  of  the  relative  for  the 
absolute. 

In  1853  appeared  the  work  of  Karl  Knies,  entitled  Die 
Politische  Oekonomie  vom  Standpunkte  der  geschichtliclien 
Methods.  This  is  an  elaborate  exposition  and  defence  of  the 
historical  method  in  its  application  to  economic  science,  and  is 
the  most  systematic  and  complete  manifesto  of  the  new  school, 
at  least  on  the  logical  side.  The  fundamental  propositions 
are  that  the  economic  constitution  of  society  at  any  epoch 
on  the  one  hand,  and  on  the  other  the  contemporary  theoretic 
conception  of  economic  science,  are  results  of  a  definite  his- 
torical development;  that  they  are  both  in  vital  connection 
with  the  whole  social  organism  of  the  period,  having  grown 
up  along  with  it  and  under  the  same  conditions  of  time,  place, 
and  nationality ;  that  the  economic  system  must  therefore  be 
regarded  as  passing  through  a  series  of  phases  correlative  with 
the  successive  stages  of  civilisation,  and  can  at  no  point  of 
this  movement  be  considered  to  have  attained  an  entirely 
definitive  form;  that  no  more  the  present  than,any  previous 
economic  organisation  of  society  is  to  be  regarded  as  absolutely 
good  and  right,  but  only  as  a  phase  in  a  continuous  historical 
evolution  ;  and  that  in  like  manner  the  now  prevalent  economic 
doctrine  is  not  to  be  viewed  as  complete  and  final,  but  only  as 
representing  a  certain  stage  in  the  unfolding  or  progressive 
manifestation  of  the  truth. 

The  theme  of  the  book  is  handled  with,  perhaps,  an  undue 
degree  of  expansion  and  detail.  The  author  exhibits  much 


*>4  POLITICAL  ECONOMY. 

sagacity  as  well  as  learning,  and  criticises  effectively  the  errors, 
inconsistencies,  and  exaggerations  of  his  predecessors.  But  in 
characterising  and  vindicating  the  historical  method  he  has 
added  nothing  to  Comte.  A  second  edition  of  his  treatise  was 
published  in  1883,  and  in  this  he  makes  the  singular  confes- 
sion that,  when  he  wrote  in  1852,  the  Philosophic  Positive, 
the  six  volumes  of  which  had  appeared  from  1830  to  1842, 
was  entirely  unknown  to  him  and,  he  adds,  probably  to  all 
German  economists.  This  is  not  to  the  credit  of  their  open- 
mindedness  or  literary  vigilance,  if  we  remember  that  Mill 
was  already  in  correspondence  with  Comte  in  1841,  and  that 
his  eulogistic  notice  of  him  in  the  Logic  appeared  in  1843. 
When,  however,  Knies  at  a  later  period  examined  Comte's 
work,  he  was,  he  tells  us,  surprised  at  finding  in  it  so  many 
anticipations  of,  or  "parallelisms"  with,  his  own  conclusions. 
And  well  he  might;  for  all  that  is  really  valuable  in  his 
methodology  is  to  be  found  in  Comte,  applied  on  a  larger 
scale,  and  designed  with  the  broad  and  commanding  power 
which  marks  the  dii  majores  of  philosophy. 

There  are  two  points  which  seem  to  be  open  to  criticism  in 
the  position  taken  by  some  German  economists  of  the  historical 
school. 

i.  Knies  and  some  other  writers,  in  maintaining  the  principle 
of  relativity  in  economic  theory,  appear  not  to  preserve  the  due 
balance  in  one  particular.  The  two  forms  of  absolutism  in 
doctrine,  cosmopolitanism  and  what  Knies  calls  perpetualism, 
he  seems  to  place  on  exactly  the  same  footing;  in  other  words, 
he  considers- the  error  of  overlooking  varieties  of  local  ciicum- 
stances  and  nationality  to  be  quite  as  serious  as  that  of  neglect- 
ing differences  in  the  stage  of  historical  development.  But 
this  is  certainly  not  so.  In  every  branch  of  Sociology  the 
latter  is  much  the  graver  error,  vitiating  radically,  wherever 
it  is  found,  the  whole  of  our  investigations.  If  we  ignore  the 
fact,  or  mistake  the  direction,  of  the  social  movement,  we  are 
wrong  in  the  most  fundamental  point  of  all — a  point,  too, 
which  is  involved  in  every  question.  But  the  variations  de- 


THE  HISTORICAL  SCHOOL.  205 

pending  on  difference  of  race,  as  affecting  bodily  and  mental 
endowment,  or  on  diversity  of  external  situation,  are  secondary 
phenomena  only ;  they  must  be  postponed  in  studying  the 
general  theory  of  social  development,  and  taken  into  account 
afterwards  when  we  come  to  examine  the  modifications  in  the 
character  of  the  development  arising  out  of  peculiar  conditions. 
And,  though  the  physical  nature  of  a  territory  is  a  condition 
which  is  likely  to  operate  with  special  force  on  economic  phe- 
nomena, it  is  rather  on  the  technical  forms  and  comparative 
extension  of  the  several  branches  of  industry  that  it  will  act 
than  on  the  social  conduct  of  each  branch,  or  the  co-ordination 
and  relative  action  of  all,  which  latter  are  the  proper  subjects 
of  the  inquiries  of  the  economist. 

2.  Some  members  of  the  school  appear,  in  their  anxiety  to 
assert  the  relativity  of  the  science,  to  fall  into  the  error  of 
denying  economic  laws  altogether;  they  are  at  least  unwilling 
to  speak  of  "natural  laws"  in  relation  to  the  economic  world. 
From  a  too  exclusive  consideration  of  law  in  the  inorganic 
sphere,  they  regard  this  phraseology  as  binding  them  to  the 
notion  of  fixity  and  of  an  invariable  system  of  practical 
economy.  But,  if  we  turn  our  attention  rather  to  the  organic 
sciences,  which  are  more  kindred  to  the  social,  we  shall  see 
that  the  term  "natural  law"  carries  with  it  no  such  implica- 
tion. As  we  have  more  than  once  indicated,  an  essential  part 
of  the  idea  of  life  is  that  of  development,  in  other  words,  of 
"ordered  change."  And  that  such  a  development  takes  place 
in  the  constitution  and  working  of  society  in  all  its  elements 
is  a  fact  which  cannot  be  doubted,  and  which  these  writers 
themselves  emphatically  assert.  That  there  exist  between  the 
several  social  elements  such  relations  as  make  the  change  of 
one  element  involve  or  determine  the  change  of  another  is 
equally  plain ;  and  why  the  name  of  natural  laws  should  be 
denied  to  such  constant  relations  of  coexistence  and  succession 
it  is  not  easy  to  see.  These  laws,  being  universal,  admit  of 
the  construction  of  an  abstract  theory  of  economic  develop- 
ment ;  whilst  a  part  of  the  German  historical  school  tends  to 


206  POLITICAL  ECONOMY. 

substitute  for  such  a  theory  a  mere  description  of  different 
national  economies,  introducing  prematurely — as  we  hav« 
pointed  out — the  action  of  special  territorial  or  ethnological 
conditions,  instead  of  reserving  this  as  the  ground  of  later 
modifications,  in  concrete  cases,  of  the  primary  general  laws 
deduced  from  a  study  of  the  common  human  evolution. 

To  the  three  writers  above  named,  Roscher,  Hildebrand, 
and  Knies,  the  foundation  of  the  German  historical  school  of 
political  economy  belongs.  It  does  not  appear  that  Roscher 
in  his  own  subsequent  labours  has  been  much  under  the  in- 
fluence of  the  method  which  he  has  in  so  many  places  admir- 
ably characterised.  In  his  System  der  Voiles wirthschaft  (vol.  i., 
Grundlagen  der  Nationalokonomie,  1854;  1 6th  ed.,  1883  :  Eng. 
transl.  by  J.  J.  Lalor,  1878;  vol.  ii.,  N.  0.  des  Ackerbaues,  1860; 
loth  ed.,  1882  ;  vol.  iii.,  N.  0.  des  Handels  und  Gewerbfleisses, 
4th  ed.,  1883)  the  dogmatic  and  the  historical  matter  are  rather 
juxtaposed  than  vitally  combined.  It  is  true  that  he  has  most 
usefully  applied  his  vast  learning  to  special  historical  studies, 
in  relation  especially  to  the  progress  of  the  science  itself.  Hia 
treatise  Ueber  das  Verhdltniss  der  Nationdldkonomie  zum  dag- 
sischen  Alterthume  (1849),  n^s  ^ur  Gtschiclde  der  Englischen 
Volkswirthschaftslehre  (Leipsic,  1851-2),  and,  above  all,  that 
marvellous  monument  of  erudition  and  industry,  his  Geschichte 
der  National-Oekonomik  in  Deutschland  (1874),  to  which  lie 
is  said  to  have  devoted  fifteen  years  of  study,  are  among  the 
most  valuable  extant  works  of  this  kind,  though  the  last  by 
its  accumulation  of  detail  is  unfitted  for  general  study  out- 
side of  Germany  itself.  Several  interesting  and  useful  mono- 
graphs are  collected  in  his  Ansichten  der  Volkswirtliscliaft  vom 
gescMchtlichen  Standpunkte  (3d  ed.,  1878).  His  systematic 
treatise,  too,  above  referred  to,  abounds  in  historical  notices 
of  the  rise  and  development  of  the  several  doctrines  of  the 
science.  But  it  cannot  be  alleged  that  he  has  done  much 
towards  the  transformation  of  political  economy  which  his 
earliest  labours  seemed  to  announce ;  and  Cossa  appears  to 
be  right  in  saying  that  his  dogmatic  work  has  not  effected 


THE  HISTORICAL  SCHOOL.  207 

any  substantial  modification  of  the  principles  of   Hermann 
and  Rau. 

The  historical  method  has  exhibited  its  essential  features 
more  fully  in  the  hands  of  the  younger  generation  of  scientific 
economists  in  Germany,  amongst  whom  may  be  reckoned 
Lujo  Brentano,  Adolf  Held,  Erwin  Nasse,  Gustav  Schmoller, 
II.  Rosier,  Albert  Schaffle,  Hans  von  Scheel,  Gustav  Schon- 
l>erg,  and  Adolf  Wagner.  Besides  the  general  principle  of  an 
historical  treatment  of  the  science,  the  leading  ideas  which 
have  been  most  strongly  insisted  on  by  this  school  are  the 
following.  I.  The  necessity  of  accentuating  the  moral  element 
in  economic  study.  This  consideration  has  been  urged  with 
special  emphasis  by  Schmoller  in  his  Grundfragen  (1875)  and 
by  Schaffle  in  his  Das  gesellschaftliche  System  der  mensclilichen 
Wirthschaft  ($&  ed.,  1873).  G.  Kries  (d.  1858)  appears  also 
to  have  handled  the  subject  well  in  a  review  of  J.  S.  Mill 
According  to  the  most  advanced  organs  of  the  school,  three 
principles  of  organisation  are  at  work  in  practical  economy ; 
and,  corresponding  with  these,  there  are  three  different  systems 
or  spheres  of  activity.  The  latter  are  (i)  private  economy  ; 
(2)  the  compulsory  public  economy ;  (3)  the  "  caritative  * 
sphere.  In  the  first  alone  personal  interest  predominates ;  in 
the  second  the  general  interest  of  the  society ;  in  the  third  the 
benevolent  impulses.  Even  in  the  first,  however,  the  action 
of  private  interest  cannot  be  unlimited ;  not  to  speak  here  of 
the  intervention  of  the  public  power,  the  excesses  and  abuses 
of  the  fundamental  principle  in  this  department  must  be 
checked  and  controlled  by  an  economic  morality,  which  can 
never  be  left  out  of  account  in  theory  any  more  than  in 
practical  applications.  In  the  third  region  above  named,  moral 
influences  are  of  course  supreme.  II.  The  close  relation  which 
necessarily  exists  between  economics  and  jurisprudence.  This 
has  been  brought  out  by  L.  von  Stein  and  H.  Rosier,  but  ia 
most  systematically  established  by  Wagner — who  is,  without 
doubt,  one  of  the  most  eminent  of  living  German  economists 
— especially  in  his  Grundleyung,  now  forming  part  of  th« 


208  POLITICAL  ECONOMY. 

comprehensive  Lehrbuch  der  politischen  Oekonomie  published 
by  him  and  Professor  Nasse  jointly.  The  doctrine  of  the 
jus  naturae,  on  which  the  physiocrats,  as  we  have  seen,  reared 
their  economic  structure,  has  lost  its  hold  on  belief,  and  the 
old  a  priori  and  absolute  conceptions  of  personal  freedom  and 
property  have  given  way  along  with  it.  It  is  seen  that  the 
economic  position  of  the  individual,  instead  of  depending 
merely  on  so-called  natural  rights  or  even  on  his  natural 
powers,  is  conditioned  by  the  contemporary  juristic  system, 
which  is  itself  an  historical  product.  The  above-named  con- 
ceptions, therefore,  half  economic  half  juristic,  of  freedom 
and  property  require  a  fresh  examination.  It  is  principally 
from  this  point  of  view  that  Wagner  approaches  economic 
studies.  The  point,  as  he  says,  on  which  all  turns  is  the  old 
question  of  the  relation  of  the  individual  to  the  community. 
Whoever  with  the  older  juristic  and  political  philosophy  and 
national  economy  places  the  individual  in  the  centre  comes 
necessarily  to  the  untenable  results  which,  in  the  economic 
field,  the  physiocratic  and  Smithian  school  of  free  competition 
has  set  up.  Wagner  on  the  contrary  investigates,  before 
anything  else,  the  conditions  of  the  economic  life  of  the  com- 
munity, and,  in  subordination  to  this,  determines  the  sphere 
of  the  economic  freedom  of  the  individual.  IIL  A  different 
conception  of  the  functions  of  the  State  from  that  entertained 
by  the  school  of  Smith.  The  latter  school  has  in  general 
followed  the  view  of  Rousseau  and  Kant  that  the  sole  office  of 
the  state  is  the  protection  of  the  members  of  the  community 
from  violence  and  fraud.  This  doctrine,  which  was  in  harmony 
with  those  of  the  jus  naturae  and  the  social  contract,  waa 
temporarily  useful  for  the  demolition  of  the  old  economic 
system  with  its  complicated  apparatus  of  fetters  and  restric- 
tions. But  it  could  not  stand  against  a  rational  historical 
criticism,  and  still  less  against  the  growing  practical  demands 
of  modern  civilisation.  In  fact,  the  abolition  of  the  impolitic 
and  discredited  system  of  European  Governments,  by  bringing 
to  the  surface  the  evils  arising  from  unlimited  competition. 


THE  HISTORICAL  SCHOOL.  209 

irresistibly  demonstrated  the  necessity  of  public  action  accord- 
ing to  new  and  more  enlightened  methods.  The  German 
historical  school  recognises  the  State  as  not  merely  an  insti- 
tution for  the  maintenance  of  order,  but  as  the  organ  of  the 
nation  for  all  ends  which  cannot  be  adequately  effected  by 
voluntary  individual  effort.  Whenever  social  aims  can  be 
attained  only  or  most  advantageously  through  its  action,  that 
action  is  justified.1  The  cases  in  which  it  can  properly  inter- 
fere must  be  determined  separately  on  their  own  merits  and 
in  relation  to  the  stage  of  national  development.  It  ought 
certainly  to  promote  intellectual  and  aesthetic  culture.  It 
ought  to  enforce  provisions  for  public  health  and  regulations 
for  the  proper  conduct  of  production  and  transport.  It  ought 
to  protect  the  weaker  members  of  society,  especially  women, 
children,  the  aged,  and  the  destitute,  at  least  in  the  absence 
of  family  maintenance  and  guardianship.  It  ought  to  secure 
the  labourer  against  the  worst  consequences  of  personal  injury 
not  due  to  his  own  negligence,  to  assist  through  legal  recogni- 
tion and  supervision  the  efforts  of  the  working  classes  for  joint 
no  less  than  individual  self-help,  and  to  guarantee  the  safety 
of  their  earnings,  when  intrusted  to  its  care. 

A  special  influence  which  has  worked  on  this  more  recent 
group  is  that  of  theoretic  socialism;  we  shall  see  hereafter 
that  socialism  as  a  party  organisation  has  also  affected  their 
practical  politics.  With  such  writers  as  St.  Simon,  Fourier, 
and  Proudhon,  Lassalle,  Marx,  Engels,  Mario,  and  Kodbertus 
(who,  notwithstanding  a  recent  denial,  seems  rightly  described 
as  a  socialist)  we  do  not  deal  in  the  present  treatise ;  but  we 
must  recognise  them  as  having  powerfully  stimulated  the 
younger  German  economists  (in  the  strict  sense  of  this  last 
word).  They  have  even  modified  the  scientific  conclusions 
of  the  latter,  especially  through  criticism  of  the  so-called 
orthodox  system.  Sch'affle  and  Wagner  may  be  especially 
named  as  having  given  a  large  space  and  a  respectful  attention 

1  It  will  in  each  case  be  necessary  to  examine  whether  the  action  can 
belt  be  taken  by  the  central,  or  by  the  local,  government. 

O 


2io  POLITICAL  ECONOMY. 

to  their  arguments.  In  particular,  the  important  consideration, 
to  which  we  have  already  referred,  that  the  economic  position 
of  the  individual  depends  on  the  existing  legal  system,  and 
notably  on  the  existing  organisation  of  property,  was  first 
insisted  on  by  the  socialists.  They  had  also  pointed  out  that 
the  present  institutions  of  society  in  relation  to  property,  in- 
heritance, contract,  and  the  like,  are  (to  use  Lassalle's  phrase) 
"historical  categories  which  have  changed,  and  are  subject 
to  further  change,"  whilst  in  the  orthodox  economy  they  are 
generally  assumed  as  a  fixed  order  of  things  on  the  basis  of 
which  the  individual  creates  his  own  position.  J.  S.  Mill, 
as  we  have  seen,  called  attention  to  the  fact  of  the  distribution 
of  wealth  depending,  unlike  its  production,  not  on  natural 
laws  alone,  but  on  the  ordinances  of  society,  but  it  is  some 
of  the  German  economists  of  the  younger  historical  school 
who  have  most  strongly  emphasised  this  view.  To  rectify 
and  complete  the  conception,  however,  we  must  bear  in  mind 
that  those  ordinances  themselves  are  not  arbitrarily  change- 
able, but  are  conditioned  by  the  stage  of  general  social 
development. 

In  economic  politics  these  writers  have  taken  up  a  position 
between  the  German  free-trade  (or,  as  it  is  sometimes  with 
questionable  propriety  called,  the  Manchester)  party  and  the 
democratic  socialists.  The  latter  invoke  the  omnipotence  of 
the  State  to  transform  radically  and  immediately  the  present 
economic  constitution  of  society  in  the  interest  of  the  pro- 
letariate. The  free-traders  seek  to  minimise  state  action  for 
any  end  except  that  of  maintaining  public  order,  and  securing 
the  safety  and  freedom  of  the  individual.  The  members  of 
the  school  of  which  we  are  now  speaking,  when  intervening 
in  the  discussion  of  practical  questions,  have  occupied  an  inter- 
mediate standpoint.  They  are  opposed  alike  to  social  revolu- 
tion and  to  rigid  laisser  faire.  Whilst  rejecting  the  socialistic 
programme,  they  call  for  the  intervention  of  the  State  in 
accordance  with  the  theoretic  principles  already  mentioned, 
for  the  purpose  of  mitigating  the  pressure  of  the  modern 


211 

industrial  system  on  its  weaker  members,  and  extending  in 
greater  measure  to  the  working  classes  the  benefits  of  advanc- 
ing civilisation.  Schaffle  in  his  Capitalismus  und  Socidlismus 
(1870;  now  absorbed  into  a  larger  work),  Wagner  in  his  Rede 
iiber  die  sociale  Frage  (1871),  and  Schdnberg  in  his  Arbeit- 
sdmter:  eine  Aufgabe  des  deutschen  Reichs  (1871)  advocated 
this  policy  in  relation  to  the  question  of  the  labourer.  These 
expressions  of  opinion,  with  which  most  of  the  German 
professors  of  political  economy  sympathised,  were  violently 
assailed  by  the  organs  of  the  free-trade  party,  who  found  in 
them  "  a  new  form  of  socialism."  Out  of  this  arose  a  lively 
controversy ;  and  the  necessity  of  a  closer  union  and  a  prac- 
tical political  organisation  being  felt  amongst  the  partisans  of 
the  new  direction,  a  congress  was  held  at  Eisenach  in  October 
1872,  for  the  consideration  of  "the  social  question."  It  was 
attended  by  almost  all  the  professors  of  economic  science  in 
the  German  universities,  by  representatives  of  the  several 
political  parties,  by  leaders  of  the  working  men,  and  by  some 
of  the  large  capitalists.  At  this  meeting  the  principles  above 
explained  were  formulated.  Those  who  adopted  them  obtained 
from  their  opponents  the  appellation  of  "  Katheder-Socialisten," 
or  "  socialists  of  the  (professorial)  chair,"  a  nickname  invented 
by  H.  B.  Oppenheim,  and  which  those  to  whom  it  was  applied 
were  not  unwilling  to  accept.  Since  1873  ^is  gr°up  has  been 
united  in  the  "  Verein  fiir  Socialpolitik,"  in  which,  as  the  con- 
troversy became  mitigated,  free-traders  also  have  taken  part. 
Within  the  Verein  a  division  has  shown  itself.  The  left  wing 
has  favoured  a  systematic  gradual  modification  of  the  law  of 
property  in  such  a  direction  as  would  tend  to  the  fulfilment 
of  the  socialistic  aspirations,  so  far  as  these  are  legitimate, 
whilst  the  majority  advocate  reform  through  state  action  on  the 
basis  of  existing  jural  institutions.  Schaffle  goes  so  far  as  to 
maintain  that  the  present  "  capitalistic"  regime  will  be  replaced 
by  a  socialistic  organisation ;  but,  like  J.  S.  Mill,  he  adjourns 
this  change  to  a  more  or  less  remote  future,  and  expects  it 
as  the  result  of  a  natural  development,  or  process  of  "  social 


212  POLITICAL  ECONOMY. 

•election ; " l  he  repudiates  any  immediate  or  violent  revolution, 
and  rejects  any  system  of  life  which  would  set  up  "  abstract 
equality  "  against  the  claims  of  individual  service  and  merit. 

The  further  the  investigations  of  the  German  historical 
school  have  been  carried,  in  the  several  lines  of  inquiry  it  has 
opened,  the  more  clearly  it  has  .come  to  light  that  the  one 
thing  needful  is  not  merely  a  reform  of  political  economy,  but 
its  fusion  in  a  complete  science  of  society.  This  is  the  view 
long  since  insisted  on  by  Auguste  Comte  ;  and  its  justness 
is  daily  becoming  more  apparent.  The  best  economists  of 
Germany  now  tend  strongly  in  this  direction.  Schaffle,  who 
is  largely  under  the  influence  of  Comte  and  Herbert  Spencer, 
has  actually  attempted  the  enterprise  of  widening  economic 
into  social  studies.  In  his  most  important  work,  which  had 
been  prepared  by  previous  publications,  Ban  und  Leben  des 
gocialen  Korpers  (1875—78;  new  ed.,  1881^,  he  proposes  to 
give  a  comprehensive  plan  of  an  anatomy,  physiology,  and 
psychology  of  human  society.  He  considers  social  processes 
as  analogous  to  those  of  organic  bodies;  and,  sound  and 
suggestive  as  the  idea  of  this  analogy,  already  used  by  Comtt., 
undoubtedly  is,  he  carries  it,  perhaps,  to  an  undue  degree  of 
detail  and  elaboration.  The  same  conception  is  adopted  by 
P.  von  Lilienfeld  in  his  Gedariken  iiber  die  Socialwissenschaft 
der  Zukunft  (1873-79).  A  tendency  to  the  fusion  of  economic 
science  in  Sociology  is  also  found  in  Adolph  Samter'sSozial-lehre 
(1875) — though  the  economic  aspect  of  society  is  there  speci- 
ally studied — and  in  Schmoller's  treatise  Ueber  einige  Grund- 
fragen  des  Rechts  und  der  Volkswirthschaftslehre  (1875) ;  and 
the  necessity  of  such  a  transformation  is  energetically  asserted 
by  H.  von  Scheel  in  the  preface  to  his  German  version  (1879) 
of  an  English  tract1  On  the  present  Position  and  Prospects  of 
Political  Economy. 

1  This  should  be  remembered  by  readers  of  M.  Leroy-Beaulieu's  work 
on  Collectivism  (1884),  in  which  he  treats  Schaffle  as  the  principal  theo- 
retic representative  of  that  form  of  socialism. 

2  By  the  present  writer  ;  being  an  Address  to  the  Section  of  Economic 
Science  and  Statistics  of  the  British  Association  at  its  meeting  in  Dublin 
in  1878. 


THE  HISTORICAL  SCHOOL.  213 

The  name  "Realistic,"  which  has  sometimes  been  given 
to  the  historical  school,  especially  in  its  more  recent  form, 
appears  to  be  injudiciously  chosen.  It  is  intended  to  mark 
the  contrast  with  the  "abstract"  complexion  of  the  orthodox 
economics.  But  the  error  of  these  economics  lies,  not  in  the 
use,  but  in  the  abuse  of  abstraction.  All  science  implies 
abstraction,  seeking,  as  it  does,  for  unity  in  variety ;  the 
question  in  every  branch  is  as  to  the  right  constitution  of  the 
abstract  theory  in  relation  to  the  concrete  facts.  Nor  is  the 
new  school  quite  correctly  distinguished  as  "  inductive." 
Deduction  doubtless  unduly  preponderates  in  the  investiga- 
tions of  the  older  economists;  but  it  must  be  remembered 
that  it  is  a  legitimate  process,  when  it  sets  out,  not  from  a 
priori  assumptions,  but  from  proved  generalisations.  And 
the  appropriate  method  of  economics,  as  of  all  sociology,  is 
not  so  much  induction  as  the  specialised  form  of  induction 
known  as  comparison,  especially  the  comparative  study  of 
"  social  series  "  (to  use  Mill's  phrase),  which  is  properly  desig- 
nated as  the  "  historical "  method.  If  the  denominations  here 
criticised  were  allowed  to  prevail,  there  would  be  a  danger 
'of  the  school  assuming  an  unscientific  character.  It  might 
occupy  itself  too  exclusively  with  statistical  inquiry,  and 
forget  in  the  detailed  examination  of  particular  provinces  of 
economic  life  the  necessity  of  large  philosophic  ideas  and  of  a 
systematic  co-ordination  of  principles.  So  long  as  economics 
remain  a  separate  branch  of  study,  and  until  they  are  absorbed 
into  Sociology,  the  thinkers  who  follow  the  new  direction  will 
do  wisely  in  retaking  their  original  designation  of  the  his- 
torical school. 

The  members  of  this  and  the  other  German  schools  have  pro- 
duced many  valuable  works  besides  those  which  there  has  been 
occasion  to  mention  above.  Ample  notices  of  their  contribu- 
tions to  the  several  brandies  of  the  science  (including  its  appli- 
cations) will  be  found  dispersed  through  Wagner  and  Nasse's 
Lehrbuch  and  the  comprehensive  Handbuch  edited  by  Schon- 
berg.  The  following  list,  which  does  not  pretend  to  approach  to 


214  POLITICAL  ECONOMY. 

completeness,  is  given  for  the  purpose  of  directing  the  student 
to  a  certain  number  of  books  which  ought  not  to  be  over- 
looked in  the  study  of  the  subjects  to  which  they  respectively 
refer : — 

Knies,  Die  Eiseribahnen  und  Hire  Wirkunyen  (1853),  Der  Telegraph 
(1857),  Geld  und  Credit  (1873-76-79) ;  Rosier,  Zur  Kritik  der  Lehre  vom 
Arbeitslohn,  (1861) ;  Schmoller,  Zur  Geschichte  der  deutschen  Kleinge- 
werbe  im  19  Jahrh.  (1870)  ;  Schaffle,  Theorie  der  ausschliessenden  Absatz- 
verhdltnisse  (1867),  Quintesscnz  des  Socialismus  (6th  ed.,  1878),  Grundsatze 
der  Steuerpolitik  1 1 880) ;  Nasse,  Mittelalterliche  Feldgemeinschaft  in  Engla  nd, 
(1869) ;  Brentano,  On  the  History  and  Development  of  Gilds,  prefixed  to 
Toulmin  Smith's  English  Gilds  (1870),  Die  Arbeitergilden  der  Gegcnwart 
(1871-72),  Das  Arbeitsverhdltniss  gemass  dem  heutiyen  Rrcht  (1877),  Die 
Arbeitsversicherung  gemass  der  heutigen  Wirthschaftsordnung  (1879), 
Der  Arbeitsversicherungszwang  (1881);  Held  (born  1844,  accidentally 
drowned  in  the  Lake  of  Thun,  1880),  Die  Kinkommensteuer  (1872),  Die 
deutsche  Arbeiterpresse  der  Gegenwart  (1873),  Sozialismus,  Sozialdemok- 
ratie  und  Sozialpolitik  (1878),  Grwndriss  fur  Vorlcswigen  iiber  National- 
okonomie  (2d  ed.,  1878) ;  Zwei  Bilcher  zur  socialen  Geschichte  Englands 
(posthumously  published,  1881)  ;  Von  Scheel  (born  1839),  Die  Theorie 
der  socialen  Frage  (1871),  Unsere  social-politischen  Parteien  (1878).  To 
these  may  be  added  L.  von  Stein,  Die  Verwaltungslehre  (1876-79),  Lehr- 
buch  der  Finanzwissen>ichaft  (4th  ed.,  1878).  E.  Diihring  is  the  ablest 
of  the  few  German  followers  of  Carey  ;  we  have  already  mentioned  (Bibl.  ' 
Note)  his  History  of  the  Science.  To  the  Russian-German  school 
belongs  the  work  of  T.  von  Bernhardi,  which  is  written  from  the  histori- 
cal point  of  view,  Versuch  einer  Kritik  der  Griinde  wdche  fur  grosses  und 
kleines  Grundeiyenthum  angefiihrt  werden  1848.  The  free-trade  school  of 
Germany  is  recognised  as  having  rendered  great  practical  services  in  that 
country,  especially  by  its  systematic  warfare  against  antiquated  privileges 
and  restrictions.  Cobden  has  furnished  the  model  of  its  political  action, 
whilst,  on  the  side  of  theory,  it  is  founded  chiefly  on  Say  and  Bastiat. 
The  members  of  this  school  whose  names  have  been  most  frequently 
heard  by  the  English  public  are  those  of  J.  Prince  Smith  (d.  1874),  who 
may  be  regarded  as  having  been  its  head  ;  H.  von  Treitschke,  author  of 
Der  Socialismus  und  seine  Conner,  1875  (directed  against  the  Katheder- 
Sucialisteu) ;  V.  Bohmert,  who  has  advocated  the  participation  of  work- 
men in  profits  (Die  Gewinnbetheiligung,  1878)1  A.  Emminghaus,  author 
of  Das  Armenwesen  vn  Europaischen  Staaten,  1870,  part  of  which  has 
been  translated  in  E.  B.  Eastwick's  Poor  Relief  in  Different  Parts  of 
Europe,  1873  ;  and  J.  H.  Schultze-Delitzsch,  well  known  as  the  founder  of 
the  German  popular  banks,  and  a  strenuous  supporter  of  the  system  of 
"  co-operation. "  The  socialist  writers,  as  has  been  already  mentioned,  are 


THE  HISTORICAL  SCHOOL.  215 

not  included  in  the  present  historical  survey,  nor  do  we  in  general  notice 
writings  of  the  economists  (properly  so  called)  having  relation  to  the 
history  of  socialism  or  the  controversy  with  it.1 

The  movement  which  created  the  new  school  in  Germany, 
with  the  developments  which  have  grown  out  of  it,  have 
without  doubt  given  to  that  country  at  the  present  time  the 
primacy  in  economic  studies.  German  influence  has  been  felt  in 
the  modification  of  opinion  in  other  countries — most  strongly, 
perhaps,  in  Italy,  and  least  so  in  France.  In  England  it  has 
been  steadily  making  way,  though  retarded  by  the  insular 
indifference  to  the  currents  of  foreign  thought  which  has 
eminently  marked  our  dominant  school.  Alongside  of  the 
influence  thus  exerted,  a  general  distaste  for  the  "  orthodox " 
system  has  been  spontaneously  growing,  partly  from  a  sus- 
picion that  its  method  was  unsound,  partly  from  a  profound 
dissatisfaction  with  the  practice  it  inspired,  and  the  detected 
hollowness  of  the  policy  of  mere  laisser  faire.  Hence  every- 
where a  mode  of  thinking  and  a  species  of  research  have  shown 
themselves,  and  come  into  favour,  which  are  in  harmony  with 
the  systematic  conceptions  of  the  historical  economists.  Thus 
a  dualism  has  established  itself  in  the  economic  world,  a 
younger  school  advancing  towards  predominance,  whilst  the 
old  school  still  defends  its  position,  though  its  adherents  tend 
more  and  more  to  modify  their  attitude  and  to  admit  the 
value  of  the  new  lights. 

ITALY. 

It  is  to  be  regretted  that  but  little  is  known  in  England 
and  America  of  the  writings  of  the  recent  Italian  economists. 

1  The  most  important  economic  work  which  has  appeared  in  Germany 
since  the  above  paragraph  was  written  is  undoubtedly  the  System  der 
Nationaloekonomie  of  G.  Cohn,  of  which  vol.  i.  (1885)  only  has  yet  been 
published.  A  movement  of  reaction  in  favour  of  the  older  school  is 
represented  by  C.  Menger  ( Untcrsuchungen  ilber  die  Methode  der  Social- 
vnssenschaften,  1883),  H.  Dietzel  (Beitrage  zur  Methode  der  Wirthschaftt- 
wissenchaft,  1884),  and  E.  Sax  (Das  Wesen  und  die  Aufgabe  der  National' 
oekonomie,  1884,  and  Grundleyung  der  theoretischenStaatttcirthachaft,  1887)1 


216  POLITICAL  ECONOMY. 

Luigi  Cossa's  Ouida,  which  was  translated  at  the  suggestion 
of  Jevons.1  has  given  us  some  notion  of  the  character  and 
importance  of  their  labours.  The  urgency  of  questions  of 
finance  in  Italy  since  its  political  renascence  has  turned  their 
researches  for  the  most  part  into  practical  channels,  and  they 
have  produced  numerous  monographs  on  statistical  and  ad- 
ministrative questions.  But  they  have  also  dealt  ahly  with 
the  general  doctrines  of  the  science.  Cossa  pronounces  Angelo 
Messedaglia  (b.  1820),  professor  at  Padua,  to  be  the  foremost 
of  contemporary  Italian  economists ;  he  has  written  on  public 
loans  (1850)  and  on  population  (1858),  and  is  regarded  aa 
a  master  of  the  subjects  of  money  and  credit.  His  pupil 
Fedele  Lampertico  (b.  1833)  *s  author  of  many  writings, 
among  which  the  most  systematic  and  complete  is  his  Economia 
del  popoli  e  degli  stati  (1874-1 884).  Marco  Minghetti  ( 1 8 1 8- 
1886),  distinguished  as  a  minister,  was  author,  besides  other 
writings,  of  Economia  pubbUca  e  le  sue  attinenze  colla  morale 
e  col  diritto  (1859).  Luigi  Luzzati,  also  known  as  an  able 
administrator,  has  by  several  publications  sought  to  prepare 
the  way  for  reforms.  The  Sicilians  Vito  Cusumano  and 
Giuseppe  Kicca  Salerno  have  produced  excellent  works  : — the 
former  on  the  history  of  political  economy  in  the  Middle  Ages 
(1876),  and  the  economic  schools  of  Germany  in  their  rela- 
tion to  the  social  question  (1875);  the  latter  on  the  theories 
of  capital,  wages,  and  public  loans  (1877-8-9).  G.  Toniolo, 
E.  Nazzani,  and  A.  Loria  have  also  ably  discussed  the  theories 
of  rent  and  profit,  as  well  as  some  of  the  most  important 
practical  questions  of  the  day.  Cossa,  to  whom  we  are  in- 
debted for  most  of  these  particulars,  is  himself  author  of 
several  works  which  have  established  for  him  a  high  reputa- 
tion, as  his  Scienza  delle  Finanze  (1875 ;  4th  ed.,  1887),  an<i 
his  Primi  Elementi  di  Economia  Politica  (1875;  8th  ed., 
1888),  which  latter  has  been  translated  into  several  European 
languages. 

1  Guide  to  the  Study  of  Political  Economy,  1880.    See  also  the  Eiblio. 
graphical  matter  in  his  Primi  Elementi  di  E.  P.,  vol.  i ,  8th  ed,  1888. 


THE  HISTORICAL  SCHOOL.  217 

Of  greater  interest  than  such  an  imperfect  catalogue  of 
writers  is  the  fact  of  the  appearance  in  Italy  of  the  economic 
dualism  to  which  we  have  referred  as  characterising  our  time. 
There  also  the  two  schools — the  old  or  so-called  orthodox  and 
the  new  or  historical — with  their  respective  modified  forms, 
are  found  face  to  face.  Cossa  tells  us  that  the  instructors 
of  the  younger  economists  in  northern  Italy  were  publicly 
denounced  in  1874  as  Germanists,  socialists,  and  corrupters 
of  the  Italian  youth.  In  reply  to  this  charge  Luzzati,  Lam- 
pertico,  and  Scialoja  convoked  in  Milan  the  first  congress 
of  economists  (1875)  with  the  object  of  proclaiming  their 
resistance  to  the  idea  which  was  sought  to  be  imposed  on 
them  "  that  the  science  was  born  and  died  with  Adam  Smith 
and  his  commentators."  M.  l£mile  de  Laveleye's  interesting 
Lettres  d' Italic  (1878-79)  throw  light  on  the  state  of  eco- 
nomic studies  in  that  country  in  still  more  recent  years.  Min- 
ghetti,  presiding  at  the  banquet  at  which  M.  de  Laveleye 
was  entertained  by  his  Italian  brethren,  spoke  of  the  "two 
tendencies  "  which  had  manifested  themselves,  and  implied  his 
own  inclination  to  the  new  views.  Carlo  Ferraris,  a  pupil  of 
Wagner,  follows  the  same  direction.  Formal  expositions  and 
defences  of  the  historical  method  have  been  produced  by 
Schiattarella  (Del  metodo  in  Economia  Sociale,  1875)  and 
Cognetti  de  Martiis  (Delle  attinenze  tra  V Economia  Socials 
e  la  Storia,  1865).  A  large  measure  of  acceptance  has  also 
been  given  to  the  historical  method  in  learned  and  judicious 
monographs  by  Ricca  Salerno  (see  especially  his  essay  Del 
metodo  in  Econ.  Pol.,  1878).  Luzzati  and  Forti  for  some  time 
edited  a  periodical,  the  Giornale  degli  Economisti,  which  was 
the  organ  of  the  new  school,  but  which,  when  Cossa  wrote, 
had  ceased  to  appear.  Cossa  himself,  whilst  refusing  his 
adhesion  to  this  school  on  the  ground  that  it  reduces  political 
economy  to  a  mere  narrative  of  facts, — an  observation  which, 
we  must  be  permitted  to  say,  betrays  an  entire  misconception 
of  its  true  principles, — admits  that  it  has  been  most  useful 
in  several  ways,  and  especially  as  having  given  the  signal  for 


218  POLITICAL  ECONOMY. 

a  salutary,  though,  as  he  thinks,  an  excessive,  reaction  against 
the  doctrinaire  exaggerations  of  the  older  theorists. 


FKANCE. 

In  France  the  historical  school  has  not  made  so  strong  an 
impression, — partly,  no  doubt,  because  the  extreme  doctrines 
of  the  Ricardian  system  never  obtained  much  hold  there.  It 
was  by  his  recognition  of  its  freedom  from  those  exaggerations 
that  Jevons  was  led  to  declare  that  "  the  truth  is  with  the 
French  school,"  whilst  he  pronounced  our  English  economists 
to  have  been  "living  in  a  fool's  paradise."  National  preju- 
dice may  also  have  contributed  to  the  result  referred  to,  the 
ordinary  Frenchman  being  at  present  disposed  to  ask  whether 
any  good  thing  can  come  out  of  Germany.  But,  as  we  have 
shown,  the  philosophic  doctrines  on  which  the  whole  proceed- 
ing of  the  historical  school  is  founded  were  first  enunciated 
by  a  great  French  thinker,  to  whose  splendid  services  most 
of  his  fellow-countrymen  are  singularly  dead.  Perhaps 
another  determining  cause  is  to  be  looked  for  in  official 
influences,  which  in  France,  by  their  action  on  the  higher 
education,  impede  the  free  movement  of  independent  con- 
viction,  as  was  seen  notably  in  the  temporary  e"clat  they  gave 
on  the  wider  philosophic  stage  to  the  shallow  eclecticism  of 
Cousin.  The  tendency  to  the  historical  point  of  view  has 
appeared  in  France,  as  elsewhere ;  but  it  has  shown  itself 
not  so  much  in  modifying  general  doctrine  as  in  leading  to 
a  more  careful  study  of  the  economic  opinions  and  institutions 
of  the  past. 

Much  useful  work  has  been  done  by  Frenchmen  (with 
whom  Belgians  may  here  be  associated)  in  the  history  of 
political  economy,  regarded  either  as  a  body  of  theory  or  as 
a  system — or  series  of  systems — of  policy.  Blanqui's  history 
(1837-38)  is  not,  indeed,  entitled  to  a  very  high  rank,  but  it 
was  serviceable  as  a  first  general  draught.  That  of  Villeneuve- 
Bargemont  (1839)  was  also  interesting  and  useful,  ae  present* 


THE  HISTORICAL  SCHOOL.  219 

ing  the  Catholic  view  of  the  development  and  tendencies  oi 
the  science.  C.  Perm's  Les  doctrines  economiques  depuis  un 
siecle  (1880)  is  written  from  the  same  point  of  view.  A 
number  of  valuable  monographs  on  particular  statesmen  or 
thinkers  has  also  been  produced  by  Frenchmen, — as,  for 
example,  that  of  A.  Batbie  on  Turgot  (Turgot  Philosophe, 
Economists,  et  Administrates,  1861);  of  A.  Neymarck  on 
the  same  statesman  (Turgot  et  ses  doctrines,  1885) ;  of  Pierre 
Clement  on  Colbert  (Histoire  de  Colbert  et  de  son  Administra- 
tion, 2d  ed.,  1875);  of  H.  Baudrillart  on  Bodin  (/.  Bodin  et 
son  Temps  ;  Tableau  des  Theories  politiques  et  des  Idees  econo- 
miques  au  16*  siecle,  1853);  of  L^once  de  Lavergne  on  the 
physiocrats  (Les  ficonomistes  Francais  du  18*  sidcle^  1870). 
Works,  too,  of  real  importance  have  been  produced  on  parti- 
cular aspects  of  the  industrial  development,  as  those  of  L.  de 
Lavergne  on  the  rural  economy  of  France  (1857),  and  of 
England,  Scotland,  and  Ireland  (1854).  The  treatise  of  M. 
de  Laveleye,  De  la  Propriety  et  de  ses  formes  primitives  (1874  ; 
Eng.  trans,  by  G.  K.  Marriott,  1878),  is  specially  worthy  of 
notice,  not  merely  for  its  array  of  facts  respecting  the  early 
forms  of  property,  but  because  it  co-operates  strongly  with  the 
tendency  of  the  new  school  to  regard  each  stage  of  economic 
life  from  the  relative  point  of  view,  as  resulting  from  an  his- 
toric past,  harmonising  with  the  entire  body  of  contemporary 
social  conditions,  and  bearing  in  its  bosom  the  germs  of  a 
future,  predetermined  in  its  essential  character,  though  modifi- 
able in  its  secondary  dispositions. 

M.  de  Laveleye  has  done  much  to  call  attention  to  the 
general  principles  of  the  historical  school,  acting  in  this  way 
most  usefully  as  an  interpreter  between  Germany  and  France. 
But  he  appears  in  his  most  recent  manifesto  (Les  Lois  natu- 
relles  et  lobjet  de  I'jZconomie  Politique,  1883)  to  separate  him- 
self from  the  best  members  of  that  school,  and  to  fall  into 
positive  error,  when  he  refuses  to  economics  the  character  of 
a  true  science  (or  department  of  a  science)  as  distinguished 
from  an  art,  and  denies  the  existence  of  economic  laws  or 


220  POLITICAL  ECONOMY. 

tendencies  independent  of  individual  wills.  Such  a  denial 
seems  to  involve  that  of  social  laws  generally,  which  is  a  sin- 
gularly retrograde  attitude  for  a  thinker  of  our  time  to  take 
up,  and  one  which  cannot  be  excused  since  the  appearance  of 
the  Philosophie  Positive.  The  use  of  the  metaphysical  phrase 
"necessary  laws"  obscures  the  question;  it  suffices  to  speak 
of  laws  which  do  in  fact  prevail.  M.  de  Laveleye  relies  on 
morals  as  supplying  a  parallel  case,  where  we  deal,  not  with 
natural  laws,  but  with  "  imperative  prescriptions,"  as  if  these 
prescriptions  did  not  imply,  as  their  basis,  observed  coexist- 
ences and  sequences,  and  as  if  there  were  no  such  thing  as 
moral  evolution.  He  seems  to  be  as  far  from  the  right  point 
of  view  in  one  direction  as  his  opponents  of  the  old  school  in 
another.  All  that  his  arguments  have  really  any  tendency  to 
prove  is  the  proposition,  undoubtedly  a  true  one,  that  economic 
facts  cannot  be  explained  by  a  theory  which  leaves  out  of 
account  the  other  social  aspects,  arid  therefore  that  our  studies 
and  expositions  of  economic  phenomena  must  be  kept  in  close 
relation  with  the  conclusions  of  the  larger  science  of  society. 

We  cannot  do  more  than  notice  in  a  general  way  some  of 
the  expository  treatises  of  which  there  has  been  an  almost 
continuous  series  from  the  time  of  Say  downwards,  or  indeed 
from  the  date  of  Germain  Garnier's  Abrege  des  Principes  de 
V Economic  Politique  (1796).  That  of  Destutt  de  Tracy  forms 
a  portion  of  his  Elements  d'Ideologie  (1823).  Droz  brought 
out  especially  the  relations  of  economics  to  morals  and  of 
wealth  to  human  happiness  (Economie  Politique,  1829).  Pelle- 
grino  Rossi, — an  Italian,  formed,  however,  as  an  economist  by 
studies  in  Switzerland,  professing  the  science  in  Paris,  and 
writing  in  French  (Court  d' Economic  Politique,  1838-54), — 
gave  in  classic  form  an  exposition  of  the  doctrines  of  Say, 
Malthus,  and  Eicardo.  Michel  Chevalier  (1806-1879),  speci- 
ally known  in  England  by  his  tract,  translated  by  Cobden,  on 
the  fall  in  the  value  of  gold  (La  Baisse  d?0r,  1858),  gives  in 
his  Gours  d  Economie  Politique  (1845-50)  particularly  valu- 
able matter  on  the  most  recent  industrial  phenomena,  and 


THE  HISTORICAL  SCHOOL.  221 

on  money  and  the  production  of  the  precious  metals.  Henri 
Baudrillart,  author  of  Lea  Rapports  de  la  Morale  et  de 
t 'Economic  Politique  (1860  ;  2d  ed.,  1883),  and  of  Histoire  du 
Luxe  (1878),  published  in  1857  a  Manuel  d'J^conomie  Politique 
(3d  ed.,  1872),  which  Cossa  calls  an  "  admirable  compendium." 
Joseph  Gamier  (Traite  de  VBconomie  Politique,  1860 ;  8th  ed., 
1880)  in  some  respects  follows  Dunoyer.  J.  G.  Courcelle- 
Seneuil,  the  translator  of  J.  S.  Mill,  whom  Prof.  F.  A.  Walker 
calls  "  perhaps  the  ablest  economist  writing  in  the  French 
language  since  J.  B.  Say,"  besides  a  Traite  theorique  et 
pratique  des  operations  de  Banque  and  Theorie  des  Enterprises 
Industrielles  (1856),  wrote  a  Traite  d' Economic  Politique 
(1858-59;  2d  ed.,  1867),  which  is  held  in  much  esteem. 
Finally,  the  Genevese,  Antoine  FJise  Cherbuliez  (d.  1869), 
was  author  of  what  Cossa  pronounces  to  be  the  best  treatise 
on  the  science  in  the  French  language  (Precis  de  la  Science 
JJlconomique,  1862).  L.  Walras,  in  Elements  d'^Jconomie 
Politique  pure  (1874-77),  and  Theorie  Mathematique  de  la 
Richesse  Sociale  (1883),  has  followed  the  example  of  Cournot 
n  attempting  a  mathematical  treatment  of  the  subject 

ENGLAND. 

Sacrificing  the  strict  chronological  order  of  the  history  of 
economics  to  deeper  considerations,  we  have  already  spoken  of 
Cairnes,  describing  him  as  the  last  original  English  writer  who 
was  an  adherent  of  the  old  school  pure  and  simple.  Both  in 
method  and  doctrine  he  was  essentially  Ricardian ;  though 
professing  and  really  feeling  profound  respect  for  Mill,  he 
was  disposed  to  go  behind  him  and  attach  himself  rather  to 
their  common  master.  Mr.  Sidgwick  is  doubtless  right  in  be- 
lieving that  his  Leading  Principles  did  much  to  shake  "  the 
unique  prestige  which  Mill's  exposition  had  enjoyed  for  nearly 
half  a  generation,"  and  in  this,  as  in  some  other  ways,  Cairnes 
may  have  been  a  dissolving  force,  and  tended  towards  radical 
change ;  but,  if  he  exercised  this  influence,  he  did  so  uucon- 


S22  POLITICAL  ECONOMY. 

aciously  and  involuntarily.  Many  influences  had,  however, 
for  some  time  been  silently  sapping  the  foundations  of  the  old 
system.  The  students  of  Comte  had  seen  that  its  method  was 
an  erroneous  one.  The  elevated  moral  teaching  of  Carlyle 
had  disgusted  the  best  minds  with  the  low  maxims  of  the 
Manchester  school.  Ruskin  had  not  merely  protested  against 
the  egoistic  spirit  of  the  prevalent  doctrine,  but  had  pointed 
to  some  of  its  real  weaknesses  as  a  scientific  theory.1  It  began 
to  be  felt,  and  even  its  warmest  partisans  sometimes  admitted. 
that  it  had  done  all  the  work,  mainly  a  destructive  one,  of 
which  it  was  capable.  Cairnes  himself  declared  that,  whilst 
most  educated  people  believed  it  doomed  to  sterility  for  the 
future,  some  energetic  minds  thought  it  likely  to  be  a  positive 
obstruction  in  the  way  of  useful  reform.  Miss  Martineau, 
who  had  in  earlier  life  been  a  thorough  Ricardian,  came  to 
think  that  political  economy,  as  it  had  been  elaborated  by  her 
contemporaries,  was,  strictly  speaking,  no  science  at  all,  and 
must  undergo  such  essential  change  that  future  generations 
would  owe  little  to  it  beyond  the  establishment  of  the  exist- 
ence of  general  laws  in  one  department  of  human  affairs.2  The 
instinctive  repugnance  of  the  working  classes  had  continued, 
in  spite  of  the  efforts  of  their  superiors  to  recommend  its 
lessons  to  them — efforts  which  were  perhaps  not  unfrequently 
dictated  rather  by  class  interest  than  by  public  spirit.  All 
the  symptoms  boded  impending  change,  but  they  were  visible 
rather  in  general  literature  and  in  the  atmosphere  of  social 
opinion  than  within  the  economic  circle.3  But  when  it  be- 
came known  that  a  great  movement  had  taken  place,  especially 
in  Germany,  on  new  and  more  hopeful  lines,  the  English  econo- 
mists themselves  began  to  recognise  the  necessity  of  a  reform 

1  The  remarkable  book  Money  and  Morals,  by  John  Lalor,  1852,  wag 
written  partly  under  the  influence  of  Carlyle.     There  is  a  good  mono- 
graph entitled  John  Ruskin,  Economist,  by  P.  Geddes,  1884. 

2  See  her  Autobiography,  2d  ed.,  vol.  ii.  p.  244. 

1  A  vigorous  attack  on  the  received  system  was  made  by  David  Syme 
IB  his  Outlines  of  an  Industrial  Science,  1876. 


THE  HISTORICAL  SCHOOL.  223 

and  even  to  further  its  advent.  The  principal  agencies  of  this 
kind,  in  marshalling  the  way  to  a  renovation  of  the  science, 
have  heen  those  of  Bagehot,  Leslie,  and  Jevong,— the  first 
limiting  the  sphere  of  the  dominant  system,  while  seeking  to 
conserve  it  within  narrower  bounds  ;  the  second  directly  assail- 
ing it  and  setting  up  the  new  method  as  the  rival  and  destined 
successor  of  the  old  ;  and  the  third  acknowledging  the  collapse 
of  the  hitherto  reigning  dynasty,  proclaiming  the  necessity  of 
an  altered  re'gime,  and  admitting  the  younger  claimant  as  joint 
possessor  in  the  future.  Thus,  in  England  too,  the  dualism 
which  exists  on  the  Continent  has  been  established  ;  and  there 
is  reason  to  expect  that  here  more  speedily  and  decisively  than 
in  France  or  Italy  the  historical  school  will  displace  its  an- 
tagonist. It  is  certainly  in  England  next  after  Germany  that 
the  preaching  of  the  new  views  has  been  most  vigorously  and 
effectively  begun. 

Walter  Bagehot  (1826-1877)  was  author  of  an  excellent 
work  on  the  English  money  market  and  the  circumstance 
which  have  determined  its  peculiar  character  (Lombard  Street 
1873  ;  7th  ed.,  1878),  and  of  several  monographs  on  particular 
monetary  questions,  which  his  practical  experience,  combined 
with  his  scientific  habits  of  thought,  eminently  fitted  him  to 
handle.  On  the  general  principles  of  economics  he  wrote 
some  highly  important  essays  collected  in  Economic  Studies 
(edited  by  K.  H.  Hutton,  1880),  the  object  of  which  was  to 
show  that  the  traditional  system  of  political  economy — the 
system  of  Ricardo  and  J.  S.  Mill — rested  on  certain  funda- 
mental assumptions,  which,  instead  of  being  universally  true  in 
fact,  were  only  realised  within  very  narrow  limits  of  time  and 
space.  Instead  of  being  applicable  to  all  states  of  society, 
it  holds  only  in  relation  to  those  "in  which  commerce  has 
largely  developed,  and  where  it  has  taken  the  form  of  develop- 
ment, or  something  like  the  form,  which  it  has  taken  in 
England."  It  is  "the  science  of  business  such  as  business 
is  in  large  and  trading  communities — an  analysis  of  the  great 
commerce  by  which  England  has  become  rich."  But  more 


224  POLITICAL  ECONOMY. 

than  this  it  is  not ;  it  will  not  explain  the  economic  life  of 
earlier  times,  nor  even  of  other  communities  in  our  own  time ; 
and  for  the  latter  reason  it  has  remained  insular ;  it  has  never 
been  fully  accepted  in  other  countries  as  it  has  been  at  home. 
It  is,  in  fact,  a  sort  of  ready  reckoner,  enabling  us  to  calculate 
roughly  what  will  happen  under  given  conditions  in  Lombard 
Street,  on  the  Stock  Exchange,  and  in  the  great  markets  of 
the  world.  It  is  a  "  convenient  series  of  deductions  from 
assumed  axioms  which  are  never  quite  true,  which  in  many 
times  and  countries  would  be  utterly  imtrue,  but  which  are 
sufficiently  near  to  the  principal  conditions  of  the  modern " 
English  "  world  to  make  it  useful  to  consider  them  by 
themselves." 

Mill  and  Cairnes  had  already  shown  that  the  science  they 
taught  was  a  hypothetic  one,  in  the  sense  that  it  dealt  not  with 
real  but  with  imaginary  men — "  economic  men  "  who  were 
conceived  as  simply  "  money-making  animals."  But  Bagehot 
went  further :  he  showed  what  those  writers,  though  they 
may  have  indicated,  had  not  clearly  brought  out,1  that  the 
world  in  which  these  men  were  supposed  to  act  is  also  "a 
very  limited  and  peculiar  world."  What  marks  off  this 
special  world,  he  tells  us,  is  the  promptness  of  transfer  of 
capital  and  labour  from  one  employment  to  another,  as  deter- 
mined by  differences  in  the  remuneration  of  those  several 
employments — a  promptness  about  the  actual  existence  of 
which  in  the  contemporary  English  world  he  fluctuates  a  good 
deal,  but  which  on  the  whole  he  recognises  as  substantially 
realised. 

Bagehot  described  himself  as  "the  last  man  of  the  ante- 
Mill  period,"  having  learned  his  economics  from  Ricardo; 
and  the  latter  writer  he  appears  to  have  to  the  end  greatly 
over-estimated.  But  he  lived  long  enough  to  gain  some  know- 
ledge of  the  historical  method,  and  with  it  he  had  "  no  quarrej 
but  rather  much  sympathy."  "Rightly  conceived,"  he  said, 

1  Jones,  whose  writings  were  apparently  unknown  to  Bagehot,  bad, 
•s  we  have  Been,  in  some  degree  anticipated  him  in  this  exposition. 


THE  HISTORICAL  SCHOOL.  225 

"it  is  no  rival  to  the  abstract  method  rightly  conceived." 
We  will  not  stop  to  criticise  a  second  time  the  term  "  abstract 
method "  here  applied  to  that  of  the  old  school,  or  to  insist 
on  the  truth  that  all  science  is  necessarily  abstract,  the  only 
question  that  can  arise  being  as  to  the  just  degree  of  abstraction, 
or,  in  general,  as  to  the  right  constitution  of  the  relation  between 
the  abstract  and  the  concrete.  It  is  more  apposite  to  remark 
that  Bagehot's  view  of  the  reconciliation  of  the  two  methods 
is  quite  different  from  that  of  most  "  orthodox "  economists. 
They  commonly  treat  the  historical  method  with  a  sort  of 
patronising  toleration  as  affording  useful  exemplifications  or 
illustrations  of  their  theorems.  But,  according  to  him,  the 
two  methods  are  applicable  in  quite  different  fields.  For  what 
he  calls  the  "  abstract "  method  he  reserves  the  narrow,  but 
most  immediately  interesting,  province  of  modern  advanced 
industrial  life,  and  hands  over  to  the  historical  the  economic 
phenomena  of  all  the  human  past  and  all  the  rest  of  the 
human  present.  He  himself  exhibits  much  capacity  for  such 
historical  research,  and  in  particular  has  thrown  real  light 
on  the  less-noticed  economic  and  social  effects  of  the  institu- 
tion of  money,  and  on  the  creation  of  capital  in  the  earlier 
stages  of  society.  But  his  principal  efficacy  has  been  in 
reducing,  by  the  considerations  we  have  mentioned,  still 
further  than  his  predecessors  had  done,  our  conceptions  of 
the  work  which  the  a  priori  metho'dcan  do.  He  in  fact 
dispelled  the  idea  that  it  can  ever  supply  the  branch  of  general 
Sociology  which  deals  with  wealth.  As  to  the  relations  of 
economics  to  the  other  sides  of  Sociology,  he  holds  that  the 
"  abstract "  science  rightly  ignores  them.  It  does  not  consider 
the  differences  of  human  wants,  or  the  social  results  of  their 
several  gratifications,  except  so  far  as  these  affect  the  pro- 
duction of  wealth.  In  its  view  "  a  pot  of  beer  and  a  picture 
— a  book  of  religion  and  a  pack  of  cards — are  equally  worthy 
of  regard."  It  therefore  leaves  the  ground  open  for  a  science 
which  will,  on  the  one  hand,  study  wealth  as  a  social  fact  in 
all  its  successive  forms  and  phases,  and,  on  the  other,  will 

p 


2*6  POLITICAL  ECONOMY. 

regard  it  in  its  true  light  as  an  instrument  for  the  conservation 
and  evolution — moral  as  well  as  material — of  human  societies. 
Though  it  will  involve  a  slight  digression,  it  is  desirable 
here  to  notice  a  further  attenuation  of  the  functions  of  the 
deductive  method,  which  is  well  pointed  out  in  Mr.  Sidgwick's 
recent  remarkable  work  on  political  economy.  He  observes 
that,  whilst  J.  S.  Mill  declares  that  the  method  a  priori  is  the 
true  method  of  the  science,  and  that  "  it  has  been  so  under- 
stood and  taught  by  all  its  most  distinguished  teachers,"  he 
yet  himself  in  the  treatment  of  production  followed  an  in- 
ductive method  (or  at  least  one  essentially  different  from  the 
deductive),  obtaining  his  results  by  "merely  analysing  and 
systematising  our  common  empirical  knowledge  of  the  facts  of 
industry."  To  explain  this  characteristic  inconsistency,  Mr. 
Sidgwick  suggests  that  Mill,  in  making  his  general  statement 
as  to  method,  had  in  contemplation  only  the  statics  of  distri- 
bution and  exchange.  And  in  this  latter  field  Mr.  Sidgwick 
holds  that  the  a  priori  method,  if  it  be  pursued  with  caution, 
if  the  simplified  premises  be  well  devised  and  the  conclusions 
"  modified  by  a  rough  conjectural  allowance  "  for  the  elements 
omitted  in  the  premises,  is  not,  for  the  case  of  a  developed 
industrial  society,  "  essentially  false  or  misleading. "  Its  con- 
clusions are  hypothetically  valid,  though  "its  utility  as  a 
means  of  interpreting  and  explaining  concrete  facts  depends 
on  its  being  used  with  as  full  a  knowledge  as  possible  of  the 
results  of  observation  and  induction."  We  do  not  think  this 
statement  need  be  objected  to,  though  we  should  prefer  to 
regard  deduction  from  hypothesis  as  a  useful  occasional  logical 
artifice,  and,  as  such,  perfectly  legitimate  in  this  as  in  other 
fields  of  inquiry,  rather  than  as  the  main  form  of  method  iu 
any  department  of  economics.  Mr.  Sidgwick,  by  his  limita- 
tion of  deduction  in  distributional  questions  to  "a  state  of 
things  taken  as  the  type  to  which  civilised  society  generally 
appioximates,"  seems  to  agree  with  Bagehot  that  for  times 
and  places  which  do  not  correspond  to  this  type  the  historical 
method  must  be  used — a  method  which,  be  it  observed,  does 


THE  HISTORICAL  SCHOOL.  227 

not  exclude,  but  positively  implies,  "reflective  analysis"  of 
the  facts,  and  their  interpretation  from  "  the  motives  of  human 
agents  "  as  well  as  from  other  determining  conditions.  In  the 
dynamical  study  of  wealth  — of  the  changes  in  its  distribution 
no  less  than  its  production — Mr.  Sidgwick  admits  that  the 
method  a  priori  "can  occupy  but  a  very  subordinate  place." 
We  should  say  that  here  also,  though  to  a  less  extent,  as  a  logi- 
cal artifice  it  may  sometimes  be  useful,  though  the  hypotheses 
assumed  ought  not  to  be  the  same  that  are  adapted  to  a  mature 
industrial  stage.  But  the  essential  organ  must  be  the  historical 
method,  studying  comparatively  the  different  phases  of  social 
evolution. 

Connected  with  the  theory  of  modern  industry  is  one  sub- 
ject which  Bagehot  treated,  though  only  in  an  incidental  way, 
much  more  satisfactorily  than  his  predecessors, — namely,  the 
function  of  the  entrepreneur,  who  in  Mill  and  Cairnes  is 
scarcely  recognised  except  as  the  owner  of  capital.  It  is  quite 
singular  how  little,  in  the  Leading  Principles  of  the  latter, 
his  active  co-operation  is  taken  into  account.  Bagehot  objects 
to  the  phrase  "wages  of  superintendence,"  commonly  used  to 
express  his  "  reward,"  as  suggesting  altogether  erroneous  ideas 
of  the  nature  of  his  work,  and  well  describes  the  large  and 
varied  range  of  his  activity  and  usefulness,  and  the  rare  com- 
bination of  gifts  and  acquirements  which  go  to  make  up  the 
perfection  of  his  equipment.  It  can  scarcely  be  doubted  that 
a  foregone  conclusion  in  favour  of  the  system  of  (so-called)  co- 
operation has  sometimes  led  economists  to  keep  these  important 
considerations  in  the  background.  They  have  been  brought 
into  due  prominence  of  late  in  the  treatises  of  Profs.  Marshall 
and  F.  A.  Walker,  who,  however,  have  scarcely  made  clear,  and 
certainly  have  not  justified,  the  principle  on  which  the  amount 
of  the  remuneration  of  the  entrepreneur  is  determined. 

We  have  seen  that  Jones  had  in  his  dogmatic  teaching 
anticipated  in  some  degree  the  attitude  of  the  new  school ; 
important  works  had  also  been  produced,  notably  by  Thomas 
Tooke  and  William  Newmarch  (History  of  Prices,  1838-1857), 


2*8  POLITICAL  ECONOMY. 

and  by  James  E.  Thorold  Kogers  (History  of  Agricultm  5  and 
Prices  in  England,  1866-82), l  on  the  course  of  English  econo- 
mic history.  But  the  first  systematic  statement  by  an  English 
writer  of  the  philosophic  foundation  of  the  historical  method, 
as  the  appropriate  organ  of  economic  research,  is  to  be  found 
in  an  essay  by  T.  E.  Cliffe  Leslie  (printed  in  the  Dublin 
University  periodical,  Hermathena,  1876  ;  since  included  in  his 
Essays  Moral  and  Political,  1879).  This  essay  was  the  most 
important  publication  on  the  logical  aspect  of  economic  science 
which  had  appeared  since  Mill's  essay  in  his  Unsettled  Ques- 
tions ;  though  Cairnes  had  expanded  and  illustrated  the  views 
of  Mill,  he  had  really  added  little  to  their  substance.  Leslie 
takes  up  a  position  directly  opposed  to  theirs.  He  criticises 
with  much  force  and  verve  the  principles  and  practice  of  the 
"  orthodox "  school.  Those  who  are  acquainted  with  what 
has  been  written  on  this  subject  by  Knies  and  other  Germans 
will  appreciate  the  freshness  and  originality  of  Leslie's  treat- 
ment. He  points  out  the  loose  and  vague  character  of  the 
principle  to  which  the  classical  economists  profess  to  trace 
back  all  the  phenomena  with  which  they  deal — namely,  the 
"desire  of  wealth."  This  phrase  really  stands  for  a  variety  of 
wants,  desires,  and  sentiments,  widely  different  in  their  nature 
and  economic  effects,  and  undergoing  important  changes  (as, 
indeed,  the  component  elements  of  wealth  itself  also  do)  in 
the  several  successive  stages  of  the  social  movement.  The 
truth  is  that  there  are  many  different  economic  motors,  altru- 
istic as  well  as  egoistic ;  and  they  cannot  all  be  lumped  to- 
gether by  such  a  coarse  generalisation.  The  a  priori  and 
purely  deductive  method  cannot  yield  an  explanation  of  the 
causes  which  regulate  either  the  nature  or  the  amount  of 
wealth,  nor  of  the  varieties  of  distribution  in  different  social 
systems,  as,  for  example,  in  those  of  France  and  England. 
"The  whole  economy  of  every  nation  is  the  result  of  a  long 
evolution  in  which  there  has  been  both  continuity  and  change, 

i  Mr.  Rogers  has  since  continued  this  work,  and  has  also  published 
The  First  Nine  Years  »f  the  Bank  of  England,  1887. 


THE  HISTORICAL  SCHOOL.  229 

and  of  winch  the  economical  side  is  only  a  particular  aspect. 
And  the  laws  of  which  it  is  the  result  must  be  sought  in 
history  and  the  general  laws  of  society  and  social  evolution." 
The  intellectual,  moral,  legal,  political,  and  economic  sides 
of  social  progress  are  indissolubly  connected.  Thus,  juridical 
facts  relating  to  property,  occupation,  and  trade,  thrown  up  by 
the  social  movement,  are  also  economic  facts.  And,  more 
generally,  "  the  economic  condition  of  English  "  or  any  other 
"  society  at  this  day  is  the  outcome  of  the  entire  movement 
which  has  evolved  the  political  constitution,  the  structure  of 
the  family,  the  forms  of  religion,  the  learned  professions,  the 
arts  and  sciences,  the  state  of  agriculture,  manufactures,  and 
commerce."  To  understand  existing  economic  relations  we 
must  trace  their  historical  evolution ;  and  "  the  philosophical 
method  of  political  economy  must  be  one  which  expounds  that 
evolution."  This  essay  was  a  distinct  challenge  addressed  to 
the  ideas  of  the  old  school  on  method,  and,  though  its  conclu- 
sions have  been  protested  against,  the  arguments  on  which  they 
are  founded  have  never  been  answered. 

With  respect  to  the  dogmatic  generalisations  of  the  "  ortho- 
dox" economists,  Leslie  thought  some  of  them  were  false,  and 
all  of  them  required  careful  limitation.  Early  in  his  career 
he  had  shown  the  hollowness  of  the  wage-fund  theory,  though 
he  was  not  the  first  to  repudiate  it.1  The  doctrine  of  an 
average  rate  of  wages  and  an  average  rate  of  profits  he  rejected 
except  under  the  restrictions  stated  by  Adam  Smith,  which 
imply  a  "  simple  and  almost  stationary  condition "  of  the 
industrial  world.  He  thought  the  glib  assumption  of  an 
average  rate  of  wages,  as  well  as  of  a  wage-fund,  had  done 
much  harm  "  by  hiding  the  real  rates  of  wages,  the  real  causes 
which  govern  them,  and  the  real  sources  from  which  wages 
proceed."  The  facts,  which  he  laboriously  collected,  he  found 

1  That  service  was  due  to  F.  D.  Longe  (Refutation  of  the  Wage-Fund 
Theory  of  Modern  Political  Economy,  1866).  Leslie's  treatment  of  the 
subject  was  contained  in  an  article  of  Fraser't  Magazine  for  July  1868, 
reprinted  as  an  appendix  to  his  Land-Systems  and  Industrial  Economy 
of  Ireland,  England,  and  Continental  Countries,  18701 


2jo  POLITICAL  ECONOMY. 

to  be  everywhere  against  the  theory.  In  every  country  there 
is  really  "  a  great  number  of  rates ;  and  the  real  problem  is, 
What  are  the  causes  which  produce  these  different  rates?" 
As  to  profits,  he  denies  that  there  are  any  means  of  knowing 
the  gains  and  prospects  of  all  the  investments  of  capital,  and 
declares  it  to  be  a  mere  fiction  that  any  capitalist  surveys  the 
whole  field.  Bagehot,  as  we  saw,  gave  up  the  doctrine  of  a 
national  level  of  wages  and  profits  except  in  the  peculiar  case 
of  an  industrial  society  of  the  contemporary  English  type ; 
Leslie  denies  it  even  for  such  a  society.  With  this  doctrine, 
that  of  cost  of  production  as  determining  price  collapses,  and 
the  principle  emerges  that  it  is  not  cost  of  production,  but 
demand  and  supply,  on,  which  domestic,  no  less  than  inter- 
national, values  depend, — though  this  formula  will  require 
much  interpretation  before  it  can  be  used  safely  and  with 
advantage.  Thus  Leslie  extends  to  the  whole  of  the  national 
industry  the  partial  negation  of  the  older  dogma  introduced 
by  Cairnes  through  the  idea  of  non-competing  groups.  He 
does  not,  of  course,  dispute  the  real  operation  of  cost  of  pro- 
duction on  price  in  the  limited  area  within  which  rates  of 
profit  and  wages  are  determinate  and  known ;  but  he  main- 
tains that  its  action  oh  the  large  scale  is  too  remote  and  un- 
certain to  justify  our  treating  it  as  regulator  of  price.  Now, 
if  this  be  so,  the  entire  edifice  which  Kicardo  reared  on  the 
basis  of  the  identity  of  cost  of  production  and  price,  with  its 
apparent  but  unreal  simplicity,  symmetry,  and  completeness, 
disappears ;  and  the  ground  is  cleared  for  the  new  structure 
which  must  take  its  place.  Leslie  predicts  that,  if  political 
economy,  under  that  name,  does  not  bend  itself  to  the  task  of 
rearing  such  a  structure,  the  office  will  speedily  be  taken  out 
of  its  hands  by  Sociology. 

Leslie  was  a  successful  student  of  several  special  economic 
subjects — of  agricultural  economy,  of  taxation,  of  the  distribu- 
tion of  the  precious  metals  and  the  history  of  prices,  and,  as 
has  been  indicated,  of  the  movements  of  wages.  But  it  is 
in  relation  to  the  method  and  fundamental  doctrines  of  the 


THE  HISTORICAL  SCHOOL.  231 

science  that  he  did  the  most  important,  because  the  most 
opportune  and  needful  work.  And,  though  his  course  was 
closed  too  early  for  the  interests  of  knowledge,  and  much  of 
what  he  produced  was  merely  occasional  and  fragmentary,  his 
services  will  be  found  to  have  been  greater  than  those  of 
many  who  have  left  behind  them  more  systematic,  elaborate, 
and  pretentious  writings. 

One  of  the  most  original  of  recent  English  writers  on  Poli- 
tical Economy  was  W.  Stanley  Jevons  (1835-1882).  The 
combination  which  he  presented  of  a  predilection  and  aptitude 
for  exact  statistical  inquiry  with  sagacity  and  ingenuity  in  the 
interpretation  of  the  results  was  such  as  might  remind  us  of 
Petty.  He  tended  strongly  to  bring  economics  into  close  re- 
lation with  physical  science.  He  made  a  marked  impression 
on  the  public  mind  by  his  attempt  to  take  stock  of  our  re- 
sources in  the  article  of  coal.  His -idea  of  a  relation  between 
the  recurrences  of  commercial  crises  and  the  period  of  the  sun- 
spots  gave  evidence  of  a  fertile  and  bold  scientific  imagination, 
though  he  cannot  be  said  to  have  succeeded  in  establishing 
such  a  relation.  He  was  author  of  an  excellent  treatise  on 
Money  and  the  Mechanism  of  Exchange  (1875),  an(^  °f  various 
essays  on  currency  and  finance,  which  have  been  collected 
since  his  death,  and  contain  vigorous  discussions  on  subjects 
of  this  nature,  as  on  bimetallism  (with  a  decided  tendency  in 
favour  of  the  single  gold  standard),  and  several  valuable  sug^ 
gestions,  as  with  respect  to  the  most  perfect  system  of  currency, 
domestic  and  international,  and  in  particular  the  extension  oi 
the  paper  currency  in  England  to  smaller  amounts.  He  pro- 
posed in  other  writings  (collected  in  Methods  of  Social  Reform, 
1883)  a  variety  of  measures,  only  partly  economic  in  their 
character,  directed  especially  to  the  elevation  of  the  working 
classes,  one  of  the  most  important  being  in  relation  to  the 
conditions  of  the  labour  of  married  women  in  factories.  This 
was  one  of  several  instances  in  which  he  repudiated  the  laisser 
jfaire  principle,  which  indeed,  in  his  book  on  The  State  in 
Relation  to  Labour  (1882),  he  refuted  in  the  clearest  and 


232  POLITICAL  ECONOMY. 

most  convincing  way,  without  changing  the  position  he  had 
always  maintained  as  an  advocate  of  free  trade.  Towards  the 
end  of  his  career,  which  was  prematurely  terminated,  he  was 
more  and  more  throwing  off  "the  incubus  of  metaphysical 
ideas  and  expressions  "  which  still  impeded  the  recognition  or 
confused  the  appreciation  of  social  facts.  He  was,  in  his  own 
words,  ever  more  distinctly  coming  to  the  conclusion  "that 
the  only  hope  of  attaining  a  true  system  of  economics  is  to 
fling  aside,  once  and  for  ever,  the  mazy  and  preposterous  as- 
sumptions of  the  Ricardian  school."  With  respect  to  method, 
though  he  declares  it  to  be  his  aim  to  "  investigate  inductively 
the  intricate  phenomena  of  trade  and  industry,"  his  views  had 
not  perhaps  assumed  a  definitive  shape.  The  editor  of  some  of 
his  remains  declines  to  undertake  the  determination  of  his 
exact  position  with  respect  to  the  historical  school.  The 
fullest  indications  we  possess  on  that  subject  are  to  be  found 
in  a  lecture  of  1876,  On  the  Future  of  Political  Economy,  He 
saw  the  importance  and  necessity  in  economics  of  historical 
investigation,  a  line  of  study  which  he  himself  was  led  by 
native  bent  to  prosecute  in  some  directions.  But  he  scarcely 
apprehended  the  full  meaning  of  the  historical  method,  which 
he  erroneously  contrasted  with  the  "theoretical,"  and  appa- 
rently supposed  to  be  concerned  only  with  verifying  and  illus- 
trating certain  abstract  doctrines  resting  on  independent  bases. 
Hence,  whilst  he  declared  himself  in  favour  of  "  thorough  re- 
form and  reconstruction,"  he  sought  to  preserve  the  a  priori 
mode  of  proceeding  alongside  of,  and  concurrently  with,  the 
historical.  Political  economy,  in  fact,  he  thought  was  breaking 
up  and  falling  into  several,  probably  into  many,  different 
branches  of  inquiry,  prominent  amongst  which  would  be  the 
"theory"  as  it  had  descended  from  his  best  predecessors, 
especially  those  of  the  French  school,  whilst  another  would 
be  the  "  historical  study,"  as  it  was  followed  in  England  by 
Jones,  Kogers,  and  others,  and  as  it  had  been  proclaimed  in 
general  principle  by  his  contemporary  Clifle  Leslie.  This  waa 
on*  of  those  eclectic  views  which  have  no  permanent  validity, 


THE  HISTORICAL  SCHOOL.  233 

but  are  useful  in  facilitating  a  transition.  The  two  methods 
will  doubtless  for  a  time  coexist,  but  the  historical  will  inevi- 
tably supplant  its  rival.  What  Jevons  meant  as  the  "  theory  " 
he  wished  to  treat  by  mathematical  methods  (see  his  Theory  of 
Political  Economy,  1871 ;  2ded.,  1879).  This  project  had,  as 
we  have  seen,  been  entertained  and  partially  carried  into  effect 
by  others  before  him,  though  he  unduly  multiplies  the  number 
of  such  earlier  essays  when,  for  example,  he  mentions  Ricardo 
and  J.  S.  Mill  as  writing  mathematically  because  they  some- 
times illustrated  the  meaning  of  their  propositions  by  dealing 
with  definite  arithmetical  quantities.  Such  illustrations,  of 
which  a  specimen  is  supplied  by  Mill's  treatment  of  the  sub- 
ject of  international  trade,  have  really  nothing  to  do  with  the 
use  of  mathematics  as  an  instrument  for  economic  research, 
or  even  for  the  co-ordination  of  economic  truths.  We  have 
already,  in  speaking  of  Cournot,  explained  why,  as  it  seems 
to  us,  the  application  of  mathematics  in  the  higher  sense  to 
economics  must  necessarily  fail,  and  we  do  not  think  that  it 
succeeded  in  Jevons's  hands.  His  conception  of  "  final  utility  " 
is  ingenious.  But  it  is  no  more  than  a  mode  of  presenting 
the  notion  of  price  in  the  case  of  commodities  homogeneous  in 
quality  and  admitting  of  increase  by  infinitesimal  additions ; 
and  the  expectation  of  being  able  by  means  of  it  to  subject 
economic  doctrine  to  a  mathematical  method  will  be  found 
illusory.  He  offers1  as  the  result  of  a  hundred  pages  of 
mathematical  reasoning  what  he  calls  a  "curious  conclusion,"2 
in  which  "  the  keystone  of  the  whole  theory  of  exchange  and 
of  the  principal  problems  of  economics  lies."  This  is  the  pro- 
position that  "the  ratio  of  exchange  of  any  two  commodities 
will  be  the  reciprocal  of  the  ratio  of  the  final  degrees  of  utility 
of  the  quantities  of  commodity  available  for  consumption  after 
the  exchange  is  completed."  Now  as  long  as  we  remain  in 
the  region  of  the  metaphysical  entities  termed  utilities,  this 
theorem  is  unverifiable  and  indeed  unintelligible,  because  we 

1  Theory  of  Political  Economy,  2d  ed.,  p.  103. 
'  Fortnightly  Review  for  November  1876,  p.  6  If* 


234  POLITICAL  ECONOMY. 

have  no  means  of  estimating  quantitatively  the  mental  impres- 
sion of  final,  or  any  other,  utility.  But  when  we  translate  it 
into  the  language  of  real  life,  measuring  the  "  utility  "  of  any- 
thing to  a  man  by  what  he  will  give  for  it,  the  proposition  is 
at  once  seen  to  be  a  truism.  What  Jevons  calls  "  final  utility  '' 
being  simply  the  price  per  unit  of  quantity,  the  theorem  states 
that,  in  an  act  of  exchange,  the  product  of  the  quantity  of  the 
commodity  given  by  its  price  per  unit  of  quantity  (estimated 
in  a  third  article)  is  the  same  as  the  corresponding  product  for 
the  commodity  received — a  truth  so  obvious  as  to  require  no 
application  of  the  higher  mathematics  to  discover  it.  If  we 
cannot  look  for  results  more  substantial  than  this,  there  is  not 
much  encouragement  to  pursue  such  researches,  which  will  in 
fact  never  be  anything  more  than  academic  playthings,  and 
which  involve  the  very  real  evil  of  restoring  the  "  metaphysical 
ideas  and  expressions  "  previously  discarded.  The  reputation 
of  Jevons  as  an  acute  and  vigorous  thinker,  inspired  with 
noble  popular  sympathies,  is  sufficiently  established.  But  the 
attempt  to  represent  him,  in  spite  of  himself,  as  a  follower  and 
continuator  of  Kicardo,  and  as  one  of  the  principal  authors  of 
the  development  of  economic  theory  (meaning  by  "  theory " 
the  old  a  priori  doctrine)  can  only  lower  him  in  estimation  by 
placing  his  services  on  grounds  which  will  not  bear  criticism. 
His  name  will  survive  in  connection,  not  with  new  theoretical 
constructions,  but  with  his  treatment  of  practical  problems, 
his  fresh  and  lively  expositions,  and,  as  we  have  shown,  his 
energetic  tendency  to  a  renovation  of  economic  method. 

Arnold  Toynbee  (1852-1883),  who  left  behind  him  a 
beautiful  memory,  filled  as  he  was  with  the  love  of  truth  and 
an  ardent  and  active  zeal  for  the  public  good,  was  author  of 
some  fragmentary  or  unfinished  pieces,  which  yet  well  deserve 
attention  both  for  their  intrinsic  merit  and  as  indicating  the 
present  drift  of  all  the  highest  natures,  especially  amongst  our 
younger  men,  in  the  treatment  of  .economic  questions.1  He 

1  See  his  Lecturet  on  the  Industrial  Revolution  in  England,  with  Memoir 
by  the  Master  of  Balliol,  1884  ;  ad  ed.,  1887. 


THE  HISTORICAL  SCHOOL.  235 

had  a  belief  in  the  organising  power  of  democracy  which  it 
is  not  easy  to  share,  and  some  strange  ideas  due  to  youthful 
enthusiasm,  such  as,  for  example,  that  Mazzini  is  "the  true 
teacher  of  our  age;"  and  he  fluctuates  considerably  in  his 
opinion  of  the  Ricardian  political  economy,  in  one  place 
declaring  it  to  be  a  detected  "  intellectual  imposture,"  whilst 
elsewhere,  apparently  under  the  influence  of  Bagehot,  he 
speaks  of  it  as  having  been  in  recent  times  "  only  corrected, 
re-stated,  and  put  into  the  proper  relation  to  the  science  of 
life,"  meaning  apparently,  by  this  last,  general  sociology.  He 
saw,  however,  that  our  great  help  in  the  future  must  come,  as 
much  had  already  come,  from  the  historical  method,  to  which 
in  his  own  researches  he  gave  preponderant  weight.  Its  true 
character,  too,  he  understood  better  than  many  even  of  those 
who  have  commended  it ;  for  he  perceived  that  it  not  merely 
explains  the  action  of  special  local  or  temporary  conditions  or 
economic  phenomena,  but  seeks,  by  comparing  the  stages  o> 
social  development  in  different  countries  and  times,  to  "  dis- 
cover laws  of  universal  application."  If,  as  we  are  told,  there 
exists  at  Oxford  a  rising  group  of  men  who  occupy  a  position 
in  regard  to  economic  thought  substantially  identical  with  that 
of  Toynbee,  the  fact  is  one  of  good  omen  for  the  future  of  the 
science. 

AMERICA. 

For  a  long  time,  as  we  have  already  observed,  little  was  done 
by  America  in  the  field  of  Economics.  The  most  obvious 
explanation  of  this  fact,  which  holds  with  respect  to  philo- 
sophical studies  generally,  is  the  absorption  of  the  energies 
of  the  nation  in  practical  pursuits.  Further  reasons  are 
suggested  in  two  instructive  Essays — one  by  Professor  Charles 
F.  Dunbar  in  the  North  American  Review,  1876,  the  other  by 
Cliffo  Leslie  in  the  Fortnightly  Review  for  October  1880. 

We  have  already  referred  to  the  Report  on  Manufactures 
by  Alexander  Hamilton ;  and  the  memorial  drawn  up  by 
Albert  Gallatin  (1832),  and  presented  to  Congress  from  the 


236  POLITICAL  ECONOMY. 

Philadelphia  Convention  in  favour  of  Tariff  reform,  deserves 
to  be  mentioned  as  an  able  statement  of  the  arguments  against 
protection.  Three  editions  of  the  Wealth  of  Nations  appeared 
in  America,  in  1789,  1811,  and  1818,  and  Ricardo's  principal 
work  was  reprinted  there  in  1819.  The  treatises  of  Daniel 
Raymond  (1820),  Thomas  Cooper  (1826),  Willard  Phillips 
(1828),  Francis  Wayland  (1837),  and  Henry  Vethake  (1838) 
made  known  the  principles  arrived  at  by  Adam  Smith  and  some 
of  his  successors.  Rae,  a  Scotchman  settled  in  Canada,  pub- 
lished (1834)  a  book  entitled  New  Principles  of  Political 
Economy,  which  has  been  highly  praised  by  J.  S.  Mill  (bk.  i. 
chap.  1 1),  especially  for  its  treatment  of  the  causes  which  deter- 
mine the  accumulation  of  capital.  The  principal  works  which 
afterwards  appeared  down  to  the  time  of  the  Civil  War  were 
Francis  Bo  wen's  Principles  of  Political  Economy,  1856,  after- 
wards entitled  American  Political  Economy,  1870  ;  John  Bas- 
com's  Political  Economy,  1859  ;  and  Stephen  ColwelFs  Ways 
and  Means  of  Payment,  1859.  In  the  period  including  and 
following  the  war  appeared  Amasa  Walker's  Science  of  Wealth, 
1866;  1 8th  ed.,  1883,  and  A  L.  Peny's  Elements  of  Political 
Economy,  1866.  A.  Walker  and  Perry  are  free-traders ;  Perry 
is  a  disciple  of  Bastiat.  Of  Carey  we  have"  already  spoken  at 
some  length ;  his  American  followers  are  E.  Peshine  Smith 
(A  Manual  of  Political  Economy,  1853),  William  Elder 
(Questions  of  the  Day,  1871),  and  Robert  E.  Thompson 
(Social  Science,  1875).  The  name  of  no  American  economist 
stands  higher  than  that  of  General  Francis  A.  Walker  (son 
of  Amasa  Walker),  author  of  special  works  on  the  Wages 
Question  (1876)  and  on  Money  (1878),  as  well  as  of  an 
excellent  general  treatise  on  Political  Economy  (1883  ;  2d  ed. 
1887).  The  principal  works  on  American  economic  history 
are  those  of  A.  S.  Bolles,  entitled  Industrial  History  of  Hie 
United  States  (1878),  and  Financial  History  of  the  United 
States,  1774-1885,  published  in  1879  an(^  ^a^er  years. 

The  deeper  and  more  comprehensive  study  of  the  subject 
which   has   of   late   years   prevailed   in   America,    added   to 


THE  HISTORICAL  SCHOOL,  237 

influences  from  abroad,  has  given  rise,  there  also,  to  a  division 
of  economists  into  two  schools — an  old  and  a  new — similar 
to  those  which  we  have  found  confronting  each  other  else- 
where. A  meeting  was  held  at  Saratoga  in  September  1885, 
at  which  a  society  was  founded,  called  the  American  Eco- 
nomic Association.  The  object  of  this  movement  was  to 
oppose  the  idea  that  the  field  of  economic  research  was 
closed,  and  to  promote  a  larger  and  more  fruitful  study  of 
economic  questions.  The  same  spirit  has  led  to  the  estab- 
lishment of  the  Quarterly  Journal  of  Economics,  published 
at  Boston  for  Harvard  University,  which  promises  to  do 
excellent  work.  The  first  article  in  this  Journal  is  by 
C.  F.  Dunbar,  whose  review  of  a  Century  of  American  Poli- 
tical Economy  we  have  already  noticed  ;  and  in  this  article 
he  sets  out,  in  the  interest  of  conciliation,  the  tendencies 
of  the  two  schools. 

This  division  of  opinion  has  been  manifested  in  a  striking 
way  by  a  discussion  on  the  method  and  fundamental  princi- 
ples of  Economics,  which  was  conducted  in  the  pages  of  the 
periodical  entitled  Science,  and  has  since  been  reproduced  in 
a  separate  form  (Science  Economic  Discussion,  New  York, 
1886).  In  this  controversy  the  views  of  the  new  school  were 
expounded  and  advocated  with  great  ability.  The  true  nature 
of  economic  method,  the  relativity  both  of  economic  institu- 
tions and  of  economic  thought,  arising  from  their  dependence 
on  varying  social  conditions,  the  close  connection  of  economic 
doctrine  with  contemporary  jurisprudence,  the  necessity  of 
keeping  economics  in  harmony  with  social  ethics,  and  the 
importance  of  a  study  of  consumption  (denied  by  J.  S.  Mill 
and  others)  were  all  exhibited  with  remarkable  clearness  and 
force.1  There  is  every  reason  to  believe  with  Leslie  that 

1  The  contributors  on  the  side  of  the  new  school  were  Dr.  Edwin 
R.  A.  Seligman,  Professor  E.  J.  James,  Professor  Richard  T.  Ely, 
Henry  C.  Adams,  Richmond  Mayo  Smith,  and  Simon  N.  Patten.  The 
representatives  of  the  old  school  were  Professor  Simon  Newcoinb, 
F.  W.  Taussig,  and  Arthur  T.  Hadley. 


t3»  POLITICAL  ECONOMY. 

America  will  take  an  active  part  both  in  bringing  to  light 
the  economic  problems  of  the  future  and  in  working  out 
their  solution. 


Contemporary  English  Economists. 

It  is  no  part  of  our  plan  to  pass  judgment  on  the  works  ol 
contemporary  English  authors, — a  judgment  which  could  not 
in  general  be  final,  and  which  would  be  subject  to  the  imputa- 
tion of  bias  in  a  greater  degree  than  estimates  of  living  writers 
in  foreign  countries.  But,  for  the  information  of  the  student, 
some  opinions  may  be  expressed  which  scarcely  any  competent 
person  would  dispute.  The  best  brief  exposition  of  political 
economy,  substantially  in  accordance  with  Mill's  treatise,  is  to 
be  found  in  Fawcett's  Manual  (6th  ed.,  1884).  But  those  who 
admit  in  part  the  claims  of  the  new  school  will  prefer  Mr.  and 
Mrs.  Marshall's  Economics  of  Industry  (2d  ed.,  1881).  Better, 
in  some  respects,  than  either  is  the  Political  Economy  oi 
the  American  writer,  Francis  A.  Walker,  to  which  we  have 
already  referred.  Other  meritorious  works  are  J.  E.  T  Eogers's 
Manual  of  Political  Economy,  1870;  John  Macdonell's  Sur- 
vey of  Political  Economy,  1871  ;  and  John  L.  Shad  well's 
System  of  Political  Economy,  1877.  Professor  W.  E.  Hearn's 
Plutology  (1864)  contains  one  of  the  ablest  extant  treatment? 
of  the  subject  of  production.  Mr.  Goschen's  is  the  best  work 
on  the  foreign  exchanges  (loth  ed.,  1879).  Mr.  Macleod, 
though  his  general  economic  scheme  has  met  with  no  accept- 
ance, is  recognised  as  supplying  much  that  is  useful  on  the  sub- 
ject of  banking.  Professor  Rogers's  Six  Centuries  of  Work  and 
Wages  (1884)  is  the  most  trustworthy  book  on  the  economic 
history  of  England  during  the  period  with  which  he  deals. 
W.  Cunningham's  Growth  of  English  Industry  and  Commerce 
(1882)  is  instructive  on  the  mercantile  system.  Dr.  W. 
Neilson  Hancock  has  shown  in  a  multitude  of  papers  a  most 
extensive  and  accurate  knowledge  of  the  social  economy  oi 
Ireland, 


THE  HISTORICAL  SCHOOL.  239 

We  cannot  here  overlook  a  work  like  that  of  Mr.  Sidgwick 
(1883),  to  which  we  have  already  referred  on  a  special  point. 
It  is  impossible  not  to  respect  and  admire  the  conscientious 
and  penetrating  criticism  which  he  applies  to  the  a  priori 
system  of  economics  in  its  most  mature  form.  But  it  is  open 
to  question  whether  the  task  was  wisely  undertaken.  It 
cannot  be  permanently  our  business  to  go  on  amending  and 
limiting  the  Ricardian  doctrines,  and  asking  by  what  special 
interpretations  of  phrases  or  additional  qualifications  they  may 
still  be  admitted  as  having  a  certain  value.  The  time  for  a 
new  construction  has  arrived ;  and  it  is  to  this,  or  at  least  to 
the  study  of  its  conditions,  that  competent  thinkers  with  the 
due  scientific  preparation  should  now  devote  themselves.  It 
is  to  be  feared  that  Mr.  Sidgwick's  treatise,  instead  of,  as 
he  hopes,  "  eliminating  unnecessary  controversy,"  will  tend  to 
revive  the  steriles  contestations  and  oiseuses  disputes  de  mots, 
which  Comte  censured  in  the  earlier  economists.  It  is  in- 
teresting to  observe  that  the  part  of  the  work  which  is,  and 
has  been  recognised  as,  the  most  valuable  is  that  in  which, 
shaking  off  the  fictions  of  the  old  school,  he  examines  inde- 
pendently by  the  light  of  observation  and  analysis  the  question 
of  the  industrial  action  of  Governments. 


CHAPTER  VII 

CONCLUSION. 

LET  us  briefly  consider  in  conclusion,  by  the  light  of  the 
preceding  historical  survey,  what  appear  to  be  the  steps  in 
the  direction  of  a  renovation  of  economic  science  which  are 
now  at  once  practicable  and  urgent. 

I.  Economic  investigation  has  hitherto  fallen  for  the  most 
part  into  the  hands  of  lawyers  and  men  of  letters,  not  into 
those  of  a  genuinely  scientific  class.  Nor  have  its  cultivators 
in  general  had  that  sound  preparation  in  the  sciences  of 
inorganic  and  vital  nature  which  is  necessary  whether  as 
supplying  bases  of  doctrine  or  as  furnishing  lessons  of  method. 
Their  education  has  usually  been  of  a  metaphysical  kind. 
Hence  political  economy  has  retained  much  of  the  form  and 
spirit  which  belonged  to  it  in  the  seventeenth  and  eighteenth 
centuries,  instead  of  advancing  with  the  times,  and  assuming 
a  truly  positive  character.  It  is  homogeneous  with  the  school 
logic,  with  the  abstract  unhistorical  jurisprudence,  with  the 
a  priori  ethics  and  politics,  and  other  similar  antiquated  sys- 
tems of  thought ;  and  it  will  be  found  that  those  who  insist 
most  strongly  on  the  maintenance  of  its  traditional  character 
have  derived  their  habitual  mental  pabulum  from  those  regions 
of  obsolete  speculation.  We  can  thus  understand  the  attitude 
of  true  men  of  science  towards  this  branch  of  study,  which 
they  regard  with  ill-disguised  contempt,  and  to  whose  pro- 
fessors they  either  refuse  or  very  reluctantly  concede  a  place 
in  theii  brotherhood. 


CONCLUSION.  241 

The  radical  vice  of  this  unscientific  character  of  political 
economy  seems  to  lie  in  the  too  individual  and  subjective 
aspect  under  which  it  has  been  treated.  Wealth  having  been 
conceived  as  what  satisfies  desires,  the  definitely  determi liable 
qualities  possessed  by  some  objects  of  supplying  physical 
energy,  and  improving  the  physiological  constitution,  are  left 
out  of  account.  Everything  is  gauged  by  the  standard  of  sub- 
jective notions  and  desires.  All  desires  are  viewed  as  equally 
legitimate,  and  all  that  satisfies  our  desires  as  equally  wealth. 
Value  being  regarded  as  the  result  of  a  purely  mental  appre- 
ciation, the  social  value  of  things  in  the  sense  of  their  objec- 
tive utility,  which  is  often  scientifically  measurable,  is  passed 
over,  and  ratio  of  exchange  is  exclusively  considered.  The 
truth  is,  that  at  the  bottom  of  all  economic  investigation 
must  lie  the  idea  of  the  destination  of  wealth  for  the  mainte- 
nance and  evolution  of  a  society.  And,  if  we  overlook  this, 
our  economics  will  become  a  play  of  logic  or  a  manual  for 
the  market,  rather  than  a  contribution  to  social  science; 
whilst  wearing  an  air  of  completeness,  they  will  be  in  truth 
one-sided  and  superficial.  Economic  science  is  something 
far  larger  than  the  Catallactics  to  which  some  have  wished 
to  reduce  it.  A  special  merit  of  the  physiocrats  seems  to 
have  lain  in  their  vague  perception  of  the  close  relation  of 
their  study  to  that  of  external  nature ;  and,  so  far,  we  must 
recur  to  their  point  of  view,  basing  our  economics  on  physics 
and  biology  as  developed  in  our  own  time.1  Further,  the 
science  must  be  cleared  of  all  the  theologico-metaphysical 
elements  or  tendencies  which  still  encumber  and  deform  it 
Teleology  and  optimism  on  the  one  hand,  and  the  jargon  of 
"natural  liberty"  and  "indefeasible  rights"  on  the  other, 
must  be  finally  abandoned. 

Nor  can  we  assume  as  universal  premises,  from  which 
economic  truths  can  be  deductively  derived,  the  convenient 

1  This  aspect  of  the  subject  has  been  ably  treated  in  papers  contributed 
to  the  Proceedings  of  the  Royal  Society  of  Edinburgh  on  several  occasions 
during  and  since  1881  by  Mr.  P.  Geddes,  well  known  as  a  biologist. 


142  POLITICAL  ECONOMY. 

formulas  which  have  been  habitually  employed,  such  as  that 
all  men  desire  wealth  and  dislike  exertion.  These  vague 
propositions,  which  profess  to  anticipate  and  supersede  social 
experience,  and  which  necessarily  introduce  the  absolute  where 
relativity  should  reign,  must  be  laid  aside.  The  laws  of 
wealth  (to  reverse  a  phrase  of  Buckle's)  must  be  inferred  from 
the  facts  of  wealth,  not  from  the  postulate  of  human  selfish- 
ness. We  must  bend  ourselves  to  a  serious  direct  study  of 
the  way  in  which  society  has  actually  addressed  itself  and  now 
addresses  itself  to  its  own  conservation  and  evolution  through 
the  supply  of  its  material  wants.  What  organs  it  has  developed 
for  this  purpose,  how  they  operate,  how  they  are  affected  by 
the  medium  in  which  they  act  and  by  the  coexistent  organs 
directed  to  other  ends,  how  in  their  turn  they  react  on  those 
latter,  how  they  and  their  functions  are  progressively  modi- 
fied in  process  of  time — these  problems,  whether  statical  or 
dynamical,  are  all  questions  of  fact,  as  capable  of  being  studied 
through  observation  and  history  as  the  nature  and  progress 
of  human  language  or  religion,  or  any  other  group  of  social 
phenomena  Such  study  will  of  course  require  a  continued 
"  reflective  analysis  "  of  the  results  of  observation  ;  and,  whilst 
eliminating  all  premature  assumptions,  we  shall  use  ascertained 
truths  respecting  human  nature  as  guides  in  the  inquiry  and 
aids  towards  the  interpretation  of  facts.  And  the  employment 
of  deliberately  instituted  hypotheses  will  be  legitimate,  but 
only  as  an  occasional  logical  artifice. 

II.  Economics  must  be  constantly  regarded  as  forming  only 
one  department  of  the  larger  science  of  Sociology,  in  vital 
connection  with  its  other  departments,  and  with  the  moral  syn 
thesis  which  is  the  crown  of  the  whole  intellectual  system. 
We  have  already  sufficiently  explained  the  philosophical 
grounds  for  the  conclusion  that  the  economic  phenomena  of 
society  cannot  be  isolated,  except  provisionally,  from  the  rest, — 
that,  in  fact,  all  the  primary  social  elements  should  be  habi- 
tually regarded  with  respect  to  their  mutual  dependence  and 
reciprocal  actions.  Especially  must  we  keep  in  view  the  high 


CONCLUSION.  343 

moral  issues  to  which  the  economic  movement  is  subservient, 
and  in  the  absence  of  which  it  could  never  in  any  great  degree 
attract  the  interest  or  fix  the  attention  either  of  eminent 
thinkers  or  of  right-minded  men.  The  individual  point  of 
view  will  have  to  be  subordinated  to  the  social ;  each  agent 
will  have  to  be  regarded  as  an  organ  of  the  society  to  which 
he  belongs  and  of  the  larger  society  of  the  race.  The  con- 
sideration of  interests,  as  George  Eliot  has  well  said,  must 
give  place  to  that  of  functions.  The  old  doctrine  of  right, 
which  lay  at  the  basis  of  the  system  of  "  natural  liberty,"  has 
done  its  temporary  work ;  a  doctrine  of  duty  will  have  to  be 
substituted,  fixing  on  positive  grounds  the  nature  of  the  social 
co-operation  of  each  class  and  each  member  of  the  community, 
and  the  rules  which  must  regulate  its  just  and  beneficial 
exercise. 

Turning  now  from  the  question  of  the  theoretic  constitu- 
tion of  economics,  and  viewing  the  science  with  respect  to  its 
influence  on  public  policy,  we  need  not  at  the  present  day 
waste  words  in  repudiating  the  idea  that  "non-government" 
in  the  economic  sphere  is  the  normal  order  of  things.  The 
laisser  faire  doctrine,  coming  down  to  us  from  the  system  of 
natural  liberty,  was  long  the  great  watchword  of  economic 
orthodoxy.  It  had  a  special  acceptance  and  persistence  in 
England  in  consequence  of  the  political  struggle  for  the 
repeal  of  the  corn  laws,  which  made  economic  discussion  in 
this  country  turn  almost  altogether  on  free  trade — a  state  of 
things  which  was  continued  by  the  effort  to  procure  a  modifi- 
cation of  the  protective  policy  of  foreign  nations.  But  it  has 
now  for  some  time  lost  the  sacrosanct  character  with  which 
it  was  formerly  invested.  This  is  a  result  not  so  much  of 
scientific  thought  as  of  the  pressure  of  practical  needs — a  cause 
which  has  modified  the  successive  forms  of  economic  opinion 
more  than  theorists  are  willing  to  acknowledge.  Social  exi- 
gencies will  force  the  hands  of  statesmen,  whatever  their 
attachment  to  abstract  formulas ;  and  politicians  have  practi- 
cally turned  their  backs  on  laisser  faire.  The  State  has  with 


244  POLITICAL  ECONOMY. 

excellent  effect  proceeded  a  considerable  way  in  the  direction 
of  controlling,  for  ends  of  social  equity  or  public  utility,  the 
operations  of  individual  interest.  The  economists  themselves 
have  for  the  most  part  been  converted  on  the  question; 
amongst  theorists  Mr.  Herbert  Spencer  finds  himself  almost 
a  vox  clamantie  in  deserto  in  protesting  against  what  he 
calls  the  "  new  slavery "  of  Governmental  interference.  He 
will  protest  in  vain,  so  far  as  he  seeks  to  rehabilitate  the 
old  absolute  doctrine  of  the  economic  passivity  of  the  State. 
But  it  is  certainly  possible  that  even  by  virtue  of  the 
force  of  the  reaction  against  that  doctrine  there  may  be  an 
excessive  or  precipitate  tendency  in  the  opposite  direction. 
With  the  course  of  production  or  exchange  considered  in 
itself  there  will  probably  be  in  England  little  disposition 
to  meddle.  But  the  dangers  and  inconveniences  which  arise 
from  the  unsettled  condition  of  the  world  of  labour  will 
doubtless  from  time  to  time  here,  as  elsewhere,  prompt  to 
premature  attempts  at  regulation.  Apart,  however,  from  the 
removal  of  evils  which  threaten  the  public  peace,  and  from 
temporary  palliations  to  ease  off  social  pressure,  the  right 
policy  of  the  State  in  this  sphere  will  for  the  present  be  one 
of  abstention.  It  is  indeed  certain  that  industrial  society 
will  not  permanently  remain  without  a  systematic  organisa- 
tion. The  mere  conflict  of  private  interests  will  never  pro- 
duce a  well-ordered  commonwealth  of  labour.  Freiheit  ist 
keine  Losung.  Freedom  is  for  society,  as  for  the  individual, 
the  necessary  condition  precedent  of  the  solution  of  practical 
problems,  both  as  allowing  natural  forces  to  develop  themselves 
and  as  exhibiting  their  spontaneous  tendencies ;  but  it  is  not 
in  itself  the  solution.  Whilst,  however,  an  organisation  of 
the  industrial  world  may  with  certainty  be  expected  to  arise 
in  process  of  time,  it  would  be  a  great  error  to  attempt  to 
improvise  one.  We  are  now  in  a  period  of  transition.  Our 
ruling  powers  have  still  an  equivocal  character ;  they  are  not 
in  real  harmony  with  industrial  life,  and  are  in  all  respects 
imperfectly  imbued  with  the  modern  spirit.  Besides,  the 


CONCLUSION.  245 

conditions  of  the  new  order  are  not  yet  sufficiently  understood. 
The  institutions  of  the  future  must  be  founded  on  sentiments 
and  habits,  and  these  must  be  the  slow  growth  of  thought 
and  experience.     The  solution,  indeed,  must  be  at  all  times 
largely  a  moral  one ;  it  is  the  spiritual  rather  than  the  tem- 
poral power  that   is   the   natural   agency   for   redressing   or 
mitigating  most  of  the  evils  associated  with  industrial  life.1 
In  fact,  if  there  is  a  tendency — and  we  may  admit  that  such 
a  tendency  is  real  or  imminent — to  push  the  State  towards  an 
extension  of  the  normal  limits  of  its  action  for  the  maintenance 
of  social  equity,  this  is  doubtless  in  some  measure  due  to  the 
fact  that  the  growing  dissidence  on  religious  questions  in  the 
most  advanced  communities  has  weakened  the  authority  of 
the  Churches,  and  deprived  their  influence  of  social  universality. 
What  is  now  most  urgent  is  not  legislative  interference  on 
any  large  scale  with  the  industrial  relations,  but  the  formation, 
in  both  the  higher  and  lower  regions  of  the  industrial  world, 
of  profound  convictions  as  to  social  duties,  and  some  more 
effective  mode  than  at  present  exists  of  diffusing,  maintaining, 
and  applying  those  convictions.     This  is  a  subject  into  which 
we  cannot  enter  here.     But  it  may  at  least  be  said  that  the 
only  parties  in  contemporary  public  life  which  seem  rightly 
to  conceive  or  adequately  to  appreciate  the  necessities  of  the 
situation  are  those  that  aim,  on  the  one  hand,  at  the  restora- 
tion of  the  old  spiritual  power,  or,  on  the  other,  at  the  forma- 
tion of  a  new  one.     And  this  leads  to  the  conclusion  that 
there   is   one   sort  of  Governmental  interference   which  the 
advocates  of  laisaer  faire  have  not  always  discountenanced, 
and  which  yet,  more  than  any  other,  tends  to  prevent  the 
gradual  and   peaceful   rise  of  a   new   industrial   and   social 

1  The  neglect  of  this  consideration,  and  the  consequent  undue  exalta- 
tion of  State  action,  which,  though  quite  legitimate,  is  altogether  in- 
sufficient, appears  to  be  the  principal  danger  to  which  the  contemporary 
German  school  of  economists  is  exposed.  When  Schmoller  says,  "  The 
State  is  the  grandest  existing  ethical  institution  for  the  education  of  the 
human  race,"  he  transfers  to  it  the  functions  of  the  Church.  The  educa- 
tional action  of  the  State  must  be,  in  the  main,  only  indirect. 


246  POLITICAL  ECONOMY. 

system, — namely,  the  interference  with  spiritual  liberty  by 
setting  up  official  types  of  philosophical  doctrine,  and  imposing 
restrictions  on  the  expression  and  discussion  of  opinions. 

It  will  be  seen  that  our  principal  conclusion  respecting 
economic  action  harmonises  with  that  relating  to  the  theoretic 
study  of  economic  phenomena.  For,  as  we  held  that  the 
latter  could  not  be  successfully  pursued  except  as  a  duly 
subordinated  branch  of  the  wider  science  of  Sociology,  so  in 
practical  human  affairs  we  believe  that  no  partial  synthesis  is 
possible,  but  that  an  economic  reorganisation  of  society  implies 
a  universal  renovation,  intellectual  and  moral  no  less  than 
material.  The  industrial  reformation  for  which  western 
Europe  groans  and  travails,  and  the  advent  of  which  is  in- 
dicated by  so  many  symptoms  (though  it  will  come  only  as 
the  fruit  of  faithful  and  sustained  effort),  will  be  no  isolated 
fact,  but  will  form  part  of  an  applied  art  of  life,  modifying 
our  whole  environment,  affecting  our  whole  culture,  and 
regulating  our  whole  conduct — in  a  word,  directing  all  our 
resources  to  the  one  great  end  of  the  conservation  and  de- 
velopment of  Humanity. 


INDEX. 


ANDERSON,  126 
Aristotle,  15,  zy,  aa,  09 


B  ABB  AGE,  I^  I 

Bacon,  47 

Baden,  Karl  Friedrich  von,  80 

Bagehot,  135,  223-227 

Bain,  149,  153 

Bandini,  70 

Banfield,  141 

Bnstahle,  103,  161 

Bastiat,  167,  170,  175-180 

Batbie,  219 

Baudrillart,  219,  221 

Beccaria,  71,  73,  74 

Belloni,  71 

Bentham,  no,  in 

Bernbardi,  214 

Berkeley,  82 

Biauchiui,  184 

Blanqui,  xiv.,  86,  218 

Bocoardo,  183 

Bodin,  43,  44,  46 

Bohmert,  von,  214 

BoisguUlebert,  57,  59 

Bolles,  236 

Bonar,  122 

Bowen,  236 

Brassey,  160 

Breutano,  207,  214 

Broggia,  71 

Buchanan,  109,  129 

Buckle,  61,  90,  242 

Burke,  190 


CAIRNKS,    106,    123,   134,    £54-162, 

178,  224 
Campanella,  46 
Campomanes,  78 
Canning,  146 
Cantillon,  60,  61 


Carey,  171-175 

Carli,  21,  75 

Carlyle,  67,  8a 

Cato,  20,  22 

Chalmers,  121,  141 

Charles  V.,  41 

Cherbuliez,  157,  221 

Chevalier,  220 

Child,  41,  48,  49,  52,  54,  6f 

Cibrario,  183 

Cicero,  19,  20,  22 

Clement,  41,  219 

Coguetti  de  Hartiis,  217 

Cohn, 215 

Coke,  52 

Colbert,  41,  42,  57,  63 

Colmeiro,  xv. 

Columella,  20,  21,  22 

Comte,  Auguste,  196-200,  and  patsim 

Comte,  Charles,  177 

Condorcet,  112-114 

Copernicus,  46 

Coquelin  et  Guillaumin,  xiv. 

Cossa,  xiv.,  216.  217 

Courcelle-Seneuil,  221 

Couruot,  180-182 

Cousin,  218 

Cromwell,  41 

Crumpe,  141 

Culpeper,  48,  67 

Cunningham,  238 

Custodi,  xv.,  78 

Cusumano,  216 


DAIRK,  xiv.,  53 
D'Alembert,  66 
Dalrymple,  92 
Darwin,  121 
Daviinzati,  43 
Davenant,  49,  67 
De  Quincey,  136 
Diderot,  56,  66,  107 


INDEX. 


Dietzel,  axs 

Digges,  48 

Droz,  220 

Dub  ring,  xiv.,  22,  214 

Dunbar,  235,  237 

Dunoyer,  168-170 

Dupont  de  Nemours,  61,  66,  68,  86, 

105,  164 
Dutot,  60 


ElSENHART,  xiv. 

Eliot,  George,  243 
Elizabeth,  Queen,  41 
Emerton,  no 
Emminghaus,  214 


FAWCETT,  147,  160,  238 
Feuelon,  60 
Ferguson,  92,  109 
Ferrara,  183 
Ferraris,  217 
Filangieri,  75 
Fontenay,  176,  177 
Forbonnais,  78 
Forti,  217 
Fortrey,  48,  52 
Foster,  161 
Franklin,  76,  81,  115,  170 


GALIANI,  46,  69,  72,  73.  75 

Garnier,  Germain,  162,  22C 

Gamier,  Joseph,  221 

Garve,  184 

Geddes,  222,  241 

Gee,  67 

Genovesi,  71,  76,  81 

Gentz,  185,  190 

Gioja,  183 

Gladstone,  146 

Godwin,  112,  113 

Goethe,  81   . 

Goschen,  238 

Gossen,  180 

Gournay,  60,  61,  66,  67 

Grimm,  70,  72 


HAMILTON,  171 
Hancock,  238 
Hearn,  238 
Held,  135,  207,  214 
Henry  VIH.,  41 
Hermann,  185,  186 
Hesiod,  ii 
Hildebrand,  107,  202 
Hobbes,  51,  54,  61 


Huet,  77 

Hufeland,  185 

Hugo,  201 

Hume,  53,  70,  83,  85,  100,  roi,  135, 

107,  108,  115,  123,  128 
Huskisson,  146 
Hutcheson,  61 
Hutchinson,  141 

INTIEHI,  71,  72 


JAKOB,  von,  185 

Jevons,  60,  159,  180,  331-434 

Jones,  142-145,  224 

Jourdain,  29 

Jovellanos,  184 

Joyce,  no 

Justi,  80 

Justinian,  az 


KAIMES,  92 

Kautz,  xiv. 

Knies,  101,  203-205,  914 

Kraus,  185 

Kries,  207 


LA  BBDYiRE,  65 

Lalor,  222 

Lampertico,  216,  217 

Lassalle,  210 

Lauderdale,  no,  in,  151 

Laughlin,  148 

Laveleye,  De,  217,  219,  220 

Lavergne,  219 

Law,  60 

Lawson,  142 

Leibnitz,  53 

Leroy-Beaulieu,  178,  212 

Leslie,  T.  E.  Cliffe,  6r,  91,  90,  III, 

149,  160,  175,  228-231 
Lilienfield,  212 
List,  171,  175,  176,  191-194 
Livy,  19 

Locke,  53,  54,  82,  100 
Longe,  159,  229 
Longtield,  141 
Loria,  216 
Lotz,  185 
Luder,  185 
Luzzati,  216,  317 

MACAULAT,  149 

M'Culloch,  xiv.,  105,  109,  ia6,  13^ 
146 


INDEX. 


249 


Macdonell,  938 

Macleod,  238 

Males  troit,  43 

Malthus,  76,  78,  1 12-122,   125,  137, 

142 

Malynes,  48 

Marshal],  Alfred,  in,  227,  238 
Marshall,  Mary  P.,  238 
Martineau,  Harriet,  140,  233 
Melon,  60 
Menger,  215 
Mengotti,  41,  77 
Mercier-Lariviere,  68,  69 
Merivale,  141 
Messediiglia,  216 
Meyer,  xv. 

Mill,  James,  117,  138,  149 
Mill,    John    Stuart,    146-154,    and 

passim 
Millar,  92 
Minghetti,  216 
Mirabeau,  66-68,  76 
Misselden,  48 
Moser,  81 
Montaigne,  44 
Montcln etien,  47 
Montesquieu,  60,  90-92,  I.TX  11=; 
More,  44 
Morellet,  69,  70 
Morley,  150 
Miiller,  189-191 
Mun,  41,  46,  47 

NASSB,  207,  208,  914 
Nazzani,  216 
Nebenius,  185 
Neri,  21,  75 
Newmarch,  237 
Neyraarck,  219 
Nicholson,  106,  no,  133 
North,  52,  S3 

OPPKNHEIM,  an 
Oresme,  36 
Ortes,  77,  81 


PAGNINI,  21 
Paillottet,  176 
Paoletti,  76 
Pecchio,  xiv.,  71,  78 
Peel,  140 
Perin,  219 

Petty,  Si,  S3,  67 
Pitt,  no 

Plato,  12-14,  32,  44 
Way  fair,  iog 


Pliny,  19,  20 
Pollexfen,  48 
Price,  115 
Prince-Smith,  214 
Pulteney,  no 


QUESNAY,  60,  61,  64-67,  70,  88,  105 


RAE.  236 

Raleigh,  41,  49 

Rau,  185 

Raynal,  76 

Ricanlo,  106,  122-137,  J43»  *4S 

Ricca-Salerno,  216,  217 

Ricci,  76 

Rinuccini,  72 

Robertson,  78 

Rogers,  109,  228,  238 

Romagnosi,  183 

Roscher,   xiv.,    201,   202,    206,   and 

passim 

Rosier,  207,  214 
Rossi,  220 

Rousseau,  20,  56,  6l 
Ruskiu,  223 


SAMTER,  313 

Sartorius,  185 

Savigny,  200,  201 

Say,  J.  B.,  2,  163-165,  189 

Sax,  215 

Scaruffi,  43 

Schiiffle,  207,  209,  211,  212,  214 

Sell  eel,  von,  xiv.,  207,  212,  214 

Schiattarella,  217 

Schlozer,  188 

Schmalz,  80 

Schmoller,  207,  214,  245 

Schonberg,  xiv.,  207,  211,  213 

Schulze-Delitzsch,  214 

Scialoja,  183 

Seneca,  20,  22 

Senior,  115,  116,  123,  130,  138-140 

Serra,  46 

Shad  well,  238 

Sidgwick,  146,  221,  226,  239 

Sismondi,  14,  135,  165-168 

Smith,  Adam,  87-110,  and  pauim 

Soden,  185 

Sonnenfels,  81 

Spencer,  117,  212 

Stafford,  45 

Stein,  von,  207,  214 

Steuart,  81,  86,  87,  115 

Stewart^  105 

Stirling,  176 


INDEX. 


Storoh,  188,  189 
Syme,  233 

TAOITOS,  19 

Taylor,  188 

Temple,  41,  49 

Terray,  69 

Thomas  Aquinas,  St.,  29 

Thornton,  "W.  T.,  141,  159 

Thiinen,  von,  185,  186-188 

Tooke,  145,  227 

Torrens,  140,  146 

Townsend,  115,  116 

Toy  n  bee,  234 

Tracy,  220 

Treitschke,  von,  214 

Tucker,  53,  86 

Turbolo,  43 


Twiss, 


DSTABU,  78 

VABBO,  ao 


Vasco,  75 
Vauban,  59 
Jerri,  73,  74,  75 
Villeneuve-Bargemont,  iiy. 
Voltaire,  56,  59,  69,  73 

WAGNER,  207-209,  211 
Wakefield,  109,  141 
Walker,  Amasa,  236 
Walker,   Francis  A.,  106,   154, 

Wallace,  iia,  nc 

Trr    i  ** 

Walras,  221 
West,  126,  131 
Whately,  141,  173 
Whewell,  144 
Wolowski,  36 


XBNOPHOW,  14 
Tooso,  115 


cm  DID. 


WORKS  ON  POLITICAL  ECONOMY 

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BASTABLE  (C.  F.)— Public  Finance.  By  C.  F.  BASTABLE. 
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BOHM-BAWERK — Capital  and  Interest.  A  Critical  History 
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BOISSEVAIN  —  The     Monetary    Problem.      By    G.     M. 

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